BHP says Anglo American shareholders must decide merger fate

BHP boss Mike Henry has challenged Anglo American’s shareholders to decide the best team to maximise returns after Anglo unveiled a new strategy to sell mines and focus on three key materials – a plan Henry described as a “variant” of BHP’s own takeover proposal.

Less than 24 hours after BHP revealed it had put a revised bid to Anglo’s board, the London-based miner’s chief executive, Duncan Wanblad, revealed a massive restructure.

The world’s largest miner BHP is proposing to swap each Anglo share for 0.8132 of its shares.Credit: Bloomberg

Anglo plans to sell its Queensland metallurgical coal mines, offload De Beers diamonds and its platinum business, and focus purely on copper, iron ore and crop nutrients. Wanblad on Monday accelerated decisions the company has been considering for years to engineer a turnaround in an attempt to thwart BHP’s second takeover offer.

The world’s largest miner is proposing to swap each Anglo share for 0.8132 of its shares. Monday’s bid is worth $64.4 billion, but Anglo says that undervalues its business and BHP’s plans to demerge its iron ore and platinum business before the takeover are too complicated.

BHP wants Ango to spin off its Kumba Iron Ore and Anglo American Platinum business before merging the two companies. The demerger would mean Anglo gives all its holdings in the two companies to its existing shareholders before the businesses are combined, and shield BHP from two potentially tricky operations.

Henry told investors at the Bank of America’s mining conference in Miami overnight (Australian time) that both sets of shareholders would benefit from significant synergies if the merger went ahead.

“Shareholders know opportunities don’t come along like this for shareholders that often in the resources sector,” Henry said. “At the end of the day, it’s going to be up to [Anglo] shareholders.

“They’ve got to look at the respective plans, decide which one they believe is going to create the greatest value soonest, and they have to make a determination as to the likelihood of execution of those plans, including which team they believe is more capable and has a better track record of execution. It’s that simple.

“We believe that both sets of shareholders would stand to gain from the very clear proposal and plan that we tabled to Anglo.”

Wanblad said his team has a proven track record in project delivery. “The new Anglo American will be a higher-margin business with much stronger cash flow generation,” he said.

Anglo American chief executive Duncan Wanblad.Credit: Tertius Pickard

Under British takeover Law, BHP has until 5pm (UK time) on May 22 to either convince Anglo to negotiate and ask the Takeovers Panel for more time to reach a deal, or announce a binding offer free of conditions – an unlikely scenario according to Barrenjoey analysts – or walk away.

Resource analysts Wood Mackenzie said Wanblad’s move would take the company from being one of the most diversified to most concentrated major miners.

“We believed that a major reshuffling of Anglo American’s portfolio was inevitable,” said James Whiteside, Wood Mackenzie’s head of metals and mining corporate research. “But opting to divest or demerge whole segments of its portfolio does align with the company’s new strategic priorities.”

Whiteside said Anglo’s iron ore and copper segments are were outsized cash generators and delivered 58 per cent of the company’s underlying earnings over the past five years.

“Looking forward, even without fresh investment, copper will overtake iron ore in cash generation and this would allow Anglo American to use the proceeds to focus on brownfield growth at these core assets,” Whiteside said.

Bloomberg’s intelligence unit said Anglo’s planned divestment of Anglo Platinum, De Beers, metallurgical coal and nickel might take at least 18 months to complete.

“[It] has much of the same execution and timing risk as the BHP bid it rejected. Yet a smaller, more-focused portfolio could draw a wider range of potential suitors once the divestments are completed,” Bloomberg said.

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