Clock ticking for BHP as $64 billion bid deadline looms

BHP is nearing make-or-break on its multibillion-dollar takeover bid for rival miner Anglo American as the clock counts down to a key regulatory deadline that will require the Australian resources giant to increase its offer, make it binding, or walk away from its prey.

BHP’s prospects for a successful takeover are fading fast.Credit: Philip Gostelow/Bloomberg

A large investment fund with a substantial stake in BHP believes the company is likely to put a formal binding offer to Anglo’s board before the UK Takeover Panel deadline expires. “They will then stay in the game,” Dominic Mlcek, a portfolio manager at Infinity Asset Management, said.

The mining giant has stalked London-listed Anglo over the past four weeks after making an initial unsolicited $60 billion offer in April, which was swiftly rejected by Anglo’s board.

The global resource company’s unwelcome attention prompted Anglo to bring forward plans for a radical downsizing in which it will offload key coal, platinum and diamond projects – a defensive move unveiled to counter BHP’s second offer, which valued its target at $64.4 billion.

However, BHP’s prospects for a successful takeover are fading fast. The company declined to comment mid-afternoon on Wednesday.

Its bid triggered provisions in British takeover law giving it until 5pm (UK time) on May 22 (2am on May 23, Australian time) to seal the deal. By that time, it must either convince Anglo to negotiate and ask the UK Takeover Panel for more time to reach a deal, announce a binding offer free of conditions, or walk away.

So far, investors are supporting BHP chief executive Mike Henry’s strategy to seize control of Anglo and its wealth of copper assets, a key commodity for the world’s energy transition.

“It makes sense,” Mlcek said. “We like the Anglo copper assets’ relatively low cost, long life, and opportunity to expand capacity. I guess it all comes down to what’s the right price.”

But Infinity Asset Management may baulk if BHP increases its offer. “We wouldn’t want them [BHP] to really turn the dial and move much higher than the current offer,” Mlcek said.

BHP is proposing to swap each Anglo share for 0.8132 of its shares.

Anglo has rejected BHP’s requirement for it to demerge its iron ore and platinum business before a takeover goes ahead as too complicated. However, Anglo chief executive Duncan Wanblad’s new strategy to simplify the company’s portfolio and focus on copper, iron ore and crop nutrients has many similar elements to those proposed by BHP.

BHP wants Anglo 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.

Mlcek said there was a 50/50 chance BHP would put a binding offer to Anglo before the 2am (Australian time) deadline on Thursday. That offer would require a leap of faith as BHP would not have an opportunity to undertake due diligence.

“That would be the potential concern given the lack of due diligence and the lack of understanding of some of what the expansion opportunities are,” Mlcek said.

BHP’s shares have risen nearly 2 per cent over the past month, to $46.32. Anglo American’s shares have climbed 24.4 per cent over the same period to £2687 ($5122).

The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.