BHP CEO throws down gauntlet to Anglo shareholders

BHP boss Mike Henry has thrown down the gauntlet to Anglo American shareholders, signalling BHP will abandon its takeover bid unless Anglo’s board negotiates.

BHP boss Mike Henry has thrown down a gauntlet to Anglo American shareholders, signalling the company will walk away from its bid for the UK-listed major if Anglo’s board doesn’t engage with BHP’s takeover offer.

BHP has until May 22 to submit a formal offer to Anglo under the UK takeovers code, but has twice been rejected out of hand by the Anglo board — decisions Mr Henry said are “disappointing”.

BHP can’t engage Anglo shareholders directly to push its case that Anglo’s board should open up takeover talks. But, speaking at the BofA Securities 2024 Global Metals, Mining & Steel Conference overnight, Mr Henry sent a clear signal a formal bid would not be delivered by the due date unless Anglo came to the negotiating table.

Mr Henry said BHP had previously demonstrated its willingness to abandon takeover bids to maintain its “hard won reputation for discipline”.

“We will remain disciplined and we’ve demonstrated that in previous endeavours,” he said.

Last year, BHP walked away from a bidding war with Andrew Forrest’s Wyloo Metals over Canadian nickel play Noront, and Mr Henry said the company had plenty of growth options in its own portfolio if Anglo’s board did not engage with BHP.

Mr Henry said BHP’s preference would have been to hold private discussions with the Anglo board to try to thrash out an acceptable offer but “rather unfortunately” news of the deal had been leaked.

BHP was hoping private discussions would lead to due diligence investigations, allowing the company to gain an insight into how a takeover would affect key assets in South America and Africa — and in particular whether pre-emptive rights may exist, and the internal asset values of some mines and whether capital gains taxes may apply if they are spun out.

Mr Henry said BHP was “never dependent on acquisitions,” and delivered a message directly to Anglo shareholders shocked by the company’s plan to tear itself to pieces in response to BHP’s bid for the company, saying they would ultimately decide Anglo’s fate.

“It is ultimately for shareholders to judge what they’ve heard,” he said.

“They will need to consider how confident they are in the delivery of value from that plan, their timetable and the execution risks. What I can say is that I am fully confident in the merits of our proposal, how it crystallises value through a premium and shared synergies over time, and it builds upon our track record of delivering value and simplification that both sets of shareholders would benefit from.”

In a veiled swipe at Anglo’s recent track record, Mr Henry pointed to BHP’s recent history of delivering its major projects on time and within budget, and its success in lowering costs and boosting productivity at its mines.

“Our strong balance sheet, and the consistent cash flows provided by our diversified portfolio, means that we’re well-placed to fund and progress the projects when they’re ready. And when we do, we deliver the plan. Our projects have typically come in on time and on budget, a track record that stacks up very well against our competitors,” he said.

The BHP boss’s comments come after Anglo American outlined a radical restructure of the company in response to a horror 2023, which opened the door for BHP’s takeover bid for its rival mining house.

Under the plan, Anglo will shed almost everything except its copper and iron ore assets to survive. Anglo will put its Queensland coking coal mines on the market, spin-off its platinum assets, put its nickel operations into care and maintenance, divest or demerge its interests in diamond major De Beers and mothball development of its huge Woodsmith potash project in the north of England.

The restructure, which Anglo boss Duncan Wanblad said last night had been in the planning before BHP launched its all-scrip bid for Anglo, would leave Anglo free to build on its South American copper mines portfolio and its iron ore interests in South Africa and Brazil.

Asset sales will be used to retire debt, and eventually free the company to return to the development of the controversial Woodsmith project after the completion of another feasibility study on the UK deposit.

Speaking ahead of Mr Henry at the BofA conference overnight, Mr Wanblad said the radical overhaul will leave Anglo as a “powerful” investment opportunity as a stand-alone company.

“This change, however, isn’t simply about shifting the same pieces into a different configuration. Instead, by simplifying this business there is real economic value creation,” he said.

“This is not a vote of no confidence in the businesses that we are going to be exiting. This is not a comment on the quality of those businesses, but in fact a recognition that the best way for them to thrive is through alternative ownership.”

A key plank of Anglo’s rejection of the BHP bid is the BHP’s requirement for the company to divest its stake in the Kumba iron ore operation in South Africa, and its dominant shareholding in South African platinum producer Amplats before a deal can complete.

“The requirement to pursue two contemporaneous demergers creates significant uncertainty, which falls disproportionately to Anglo American shareholders,” Anglo said, in response to BHP’s sweetened bid for the company this week.

But Mr Henry made a point of noting the hypocrisy inherent in Anglo’s own restructuring plan, which includes the divestment of Amplats.

Mike Henry said Anglo’s plan to split its assets was just a “variant” on BHP’s “quite compelling” bid.

“What we see today is some variant on the approach which we have brought forward which involves spinning out one of the assets, which I think is a pretty clear indicator that it is doable,” he said.

“This isn’t novel BHP thinking; shareholders were calling for it previously, brokers have called for it … So we actually believe this is fully executable.”

Speaking on Tuesday, Mr Wanblad said the regulatory hurdle of running both two spin-offs and a proposed takeover at the same time was far more complex than the demerger and sale plans outlined under the restructuring.

Wood Mackenzie analyst James Whiteside said overnight a major reshuffle of Anglo’s assets was inevitable, noting that the company’s iron ore and copper assets had been “outsized cash generators, delivering 58 per cent of the company’s underlying earnings before interest, taxes, depreciation, and amortisation over the last 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,” he said.

Mr Whiteside said that Anglo could realise up to $US25bn in asset value through divestment or demerger (gross of exit costs) of its other commodities assets such as platinum, steelmaking coal and nickel over the next few years – a $US9.1bn over Wood Mackenzie’s base net asset value (NAV).

But, the WoodMac analyst said the plan would also give credibility to BHP’s takeover bid, and potentially make it more palatable to both shareholders and regulators in South Africa, who could oppose the BHP proposal.

BHP shares closed up 2.2 per cent on Wednesday, at $44.09 each.

Anglo American shares were up 0.8 per cent in early London trade, at £26.39.

Originally published as BHP CEO throws down gauntlet to Anglo shareholders