Anglo rips itself apart to try to save it from BHP

BHP boss Mike Henry has welcomed Anglo chief executive Duncan Wanblad’s radical plan, saying the move is a ‘variant’ of its own rejected bid, offering shareholders a clear choice.

Anglo American Duncan Wanblad. Picture: Anglo American

Anglo American will sell, spin-off, slow or shutter everything in its portfolio outside its copper and iron ore interests in a sweeping restructure that is unlikely to kill off BHP’s interest in the company.

Just a day after formally knocking back BHP’s latest sweetened bid, Anglo chief executive Duncan Wanblad unveiled what he described as the most “radical” changes to Anglo in decades.

Under the plan, the company will sell its Queensland metallurgical mines, spin-off its platinum assets, put its nickel operations into care and maintenance, divest or demerge its interests in diamond behemoth De Beers and indefinitely suspend the development of its huge Woodsmith potash project in the United Kingdom.

The restructure, which Mr Wanblad estimated would take two years to complete, would leave Anglo as a dramatically slimmed down company built around its South American copper mines and its iron ore interests in South Africa and Brazil.

BHP’s appetite for Anglo was primarily driven by the target company’s South American copper portfolio, which includes interests in three of the top 10 copper mines on the continent. The Melbourne-based mining giant’s offer was conditional on several steps including Anglo spinning off its platinum assets, and analysts and shareholders had widely expected BHP to have to sell off a host of Anglo’s non-copper assets if it succeeded in acquiring the company.

Asked if Anglo’s restructure plans had simply made the company even more attractive to BHP, Mr Wanblad said that anyone wanting to buy Anglo after its restructure would have to pay up.

“What we are creating here is an incredibly robust business with three fantastic verticals. It is going to be the best run with the best capabilities in terms of development as far as the growth potential in each of these businesses are concerned, it’s going to be extremely highly valued and at that particular point, it is going to be what it is,” he said.

Anglo American chief executive Duncan Wanblad speaking at the World Mining Congress in Brisbane. Pictures supplied by Anglo American.

“To the extent that anybody wants to buy us at that particular point in time, they’re going to have to pay an enormous amount of money for it.”

The whittled-down Anglo would retain its Woodsmith polyhalite project in the UK, although its immediate planned spending on the development would end with the completion of a feasibility study next year. The company had previously expected to spend billions on bringing Woodsmith into production by 2027, but that start date has now been pushed back indefinitely.

Mr Wanblad said the company had already received “strong buyer interest” in its metallurgical coal assets, with the proceeds from the sale of those mines to go towards strengthening the company’s balance sheet.

Anglo had been under pressure to give a detailed plan B for the company after knocking back two approaches from BHP in recent weeks.

The announcement of the restructuring followed Anglo’s earlier formal rejection of an improved GBP34 billion offer from BHP, up from the initial GBP31.3bn pitch from late last month.

Overnight, BHP chief executive Mike Henry said Anglo’s plan to split its assets is just ‘some variant’ on its “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 told the Bank of America Securities conference overnight after Anglo revealed its plans.

“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.”

He said it “at the end of the day it is going to be up to shareholders, they’ve got to look at the respective plans and decide which one they believe is going to create greatest value soonest”.

“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 executions, it is that simple.”

BHP is “disappointed” that Anglo had declined to enter into further talks over the improved terms.

In a statement issued before Anglo announced its restructure plans, Mr Henry had said the company was disappointed that Anglo had rejected a proposal that would have been a “win-win” for BHP and Anglo shareholders.

“BHP and Anglo American are a strategic fit and the combination is a unique and compelling opportunity to unlock significant synergies by bringing together two highly complementary, world class businesses,” he said.

BHP chief executive Mike Henry pictured at their Collins Street headquarters ahead of profit results. Picture NCA NewsWire / Aaron Francis

“The combined business would have a leading portfolio of high-quality assets in copper, potash, iron ore and metallurgical coal and BHP would bring its track record of operational excellence to maximise returns from these high-quality assets.”

The new offer included the same condition requiring Anglo to spin-off its South African iron ore and platinum operations that was included under the original offer. That requirement looks set to be a key sticking point for any deal moving ahead, with Anglo describing the deal structure as highly unattractive, uncertain and complex.

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.

While the overhaul will leave Anglo centred around the two commodities at the heart of BHP’s growth strategy, Mr Wanblad said the carve-up of the company was not motivated by picking commodity winners.

“There are no bad assets in the context of those that we are looking to demerge or divest,” he said.

“While all of these assets are excellent in their own right, we need to do some to manage the balance sheet and we need to do others because they are completely suppressing the value of the balance of the portfolio.”

Earlier, high-profile stockbroker Angus Aitken, from Paddington-based Aitken Mount Capital Partners, told his clients that the spectre of the Anglo deal meant BHP would be “complete dead money” for the next 12 months regardless of the outcome.

“Either they get Anglo by paying a higher price, or get into a bidding war with Rio,” he said.

“Or they walk away and underperform as they have telegraphed their desire for big M & A.”

He said the mining giant would have been better off trying to buy the copper assets of Swiss mining heavyweight Glencore.

A successful pursuit of Anglo, Mr Aitken said, would leave BHP then needing to sell off all the other assets it picked up alongside the copper and high grade iron ore assets they are interested in.

“I have zero confidence they can sell the non-core assets they don’t want at high prices because there is a very small circle of buyers who would be interested in many of them,” he said.

Anglo’s London-listed shares were down 1.26 per cent to GBP26.73 in early trade following the announcement.