BHP confirms non-binding $60b takeover offer for rival Anglo American

Mining giant BHP has confirmed it made a $60 billion proposal to rival Anglo American about buying the 107-year-old mining company, in what could rank as this year’s biggest deal.

On Thursday evening, BHP responded to press speculation, confirming in a statement to the London Stock Exchange it made a non-binding offer to the board of directors of Anglo American on April 16 regarding a potential combination of the two firms via a scheme of arrangement, subject to due diligence.

It comes after London-listed Anglo American said this morning it received an unsolicited all-share merger proposal from the world’s biggest miner, confirming media reports about a potential bid.

It would be a mega deal: BHP is eyeing smaller rival Anglo American.Credit: Will Willitts

BHP said under the terms of its proposal, ordinary shareholders of Anglo American would receive 0.7097 BHP shares for each ordinary share in Anglo American, and ordinary shares in Anglo Platinum and Kumba Iron Ore.

Based on the closing market prices as at April 23, 2024, BHP’s proposal values Anglo American ordinary shares at 25.08 British pounds ($48.10) each, and Anglo American’s share capital at 31.3 billion British pounds ($60.03 billion).

That represents a premium on the implied market value of Anglo American’s unlisted assets of roughly 31 per cent, and a 19 per cent premium to the broker median net asset value of Anglo American, excluding Anglo Platinum and Kumba.

BHP said the combined entity would have a leading portfolio of large, low-cost, long-life tier-one assets focused on iron ore and metallurgical coal, as well as future-facing commodities including potash and copper.

“Anglo American’s other high-quality operations, including its diamond business, would be subject to a strategic review post completion,” BHP said.

Anglo’s board is reviewing the proposal and cautioned that there is no certainty a binding offer will be made. BHP’s proposal was conditional on Anglo first splitting off its South African platinum and iron ore units, Anglo’s statement said.

If successful, a takeover would mark a return to large-scale dealmaking for BHP, which has revived its appetite for transformational acquisitions in the past couple of years under chief executive officer Mike Henry.

Anglo American has a number of mines in Australia, including coal operations in Queensland.Credit: Bloomberg

Anglo American has long been viewed as a potential target among the largest miners, particularly because it owns big South American copper operations at a time when most of the industry is seeking to grow in that business. However, suitors have been put off by its complicated structure and mix of commodities, and especially its deep exposure to South Africa.

Anglo has faced a series of major setbacks over the past year, as prices for some of its key products plunged, while operational difficulties have forced the company to slash its production targets — driving down its valuation and leaving the company vulnerable to potential bidders.

Shares of Anglo American have fallen 12 per cent over the last 12 months, giving the company a market value of £27 billion ($52 billion).

BHP, which trades in London and Sydney, has a market value of about $230 billion.

Deliberations are at an early stage and there’s no certainty that BHP will decide to proceed with a deal, the people said. Representatives for BHP declined to comment.

A deal for Anglo American would likely rank as the world’s biggest takeover globally this year, surpassing Capital One Financial’s $US35 billion acquisition of Discover Financial Services, according to data compiled by Bloomberg.

It would also represent the first mega deal among the world’s biggest diversified miners in over a decade. BHP and its biggest rivals spent years on the sidelines after a series of disastrous transactions, but have warmed up to the prospect of dealmaking after reassuring investors that they have learned from past mistakes.

BHP last year bought copper producer Oz Minerals for about $9.6 billion in its first major purchase in years, but has until now focused on selling assets such as oil, gas and coal.

While Anglo’s valuation may make it more attractive, it remains a highly complicated business.

The company owns majority stakes in two South African-listed miners – Anglo American Platinum and Kumba Iron Ore — and is the majority owner of diamond miner De Beers. It also has a long and complicated relationship with South Africa, where the state pension fund manager is its biggest shareholder.

Anglo said BHP’s proposal was to first hand Anglo’s stakes in the two South African businesses to Anglo’s shareholders before proceeding with a takeover. The two parts of the proposal would be interconditional, it said.

Anglo’s other operations include copper, nickel, steelmaking coal and Brazilian iron ore.

For BHP, the lure for any deal would be Anglo’s copper business. The world’s biggest miners are all seeking to expand their copper production in anticipation of rising prices as demand for electrification rises while future supplies look constrained.

Anglo’s South American copper business has long been sought after by bigger players in the industry, although it has recently faced setbacks and had to reduce its copper production forecasts.

A bid for the whole of Anglo American would likely raise antitrust issues in several of the company’s key markets, while Anglo’s production of platinum-group metals and diamonds doesn’t present an obvious fit with BHP’s strategy or commodity mix.

Bloomberg

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