BHP shareholders remain hopeful of deal on takeover despite rebuff from Anglo American

Anglo American has slammed the door shut on further talks by failing to extend the deadline for BHP to make a firm bid.

The fact that BHP had asked for an extension for negotiations with Anglo American on Wednesday showed that it remained a keen buyer of the London-listed miner.

And, as it was made clear last week, the discussion has gone beyond value and moved to deal structure.

But clearly, it’s not been enough to appease Anglo American. BHP shareholders on Wednesday night were taking the view that the negotiations with its takeover target Anglo American would probably result in a compromise. But Anglo American has slammed the door shut on further talks by failing to extend the deadline for BHP to make a firm bid in an announcement that followed its earlier increased bid.

BHP had tried to show that it was moving to allay concerns around risks in South Africa related to its deal.

Another week would have allowed Anglo American time to work through the issues further.

But some believe BHP should have even gone as far as underwriting the transaction by taking the South African Kumba iron ore operation from Anglo American shareholders as part of the deal, rather than returning it to them as planned, BHP could combine it with some coal mines in a sale process down the track and potentially achieve a better price for the assets.

As reported on Wednesday, among BHP’s efforts to allay fears surrounding structure was the offer of a “reverse break fee”, and it had offered direct responses to Anglo’s concerns, including offering the South African government a three-year guarantee to maintain staffing levels in the country, sharing any costs of employee share schemes, and establishing a mining centre of excellence in South Africa to train mine workers and conduct research and development for BHP’s global mining operations.

Elsewhere, an odd application to the Takeovers Panel revealed to the market on Wednesday shows that mergers and acquisitions remain on the agenda for Ramelius Resources.

The gold miner led by Mark Zeptner is seen as a sophisticated operator that will soon be more cashed-up than it already is and has executed well on M&A in the past, so the market would probably support any deal it puts forward.

It walked away from a deal to buy Canadian gold miner Karora, with which Westgold Resources has agreed to embark on a $2.2bn merger transaction.

But judging by the Takeovers Panel application, it appears that Ramelius is keen to take part in some sort of two-way of three-way tie-up with Westgold and/or Karora.

It’s objecting to the cost of the break fee on Westgold’s deal with Karora, which is standard for deals in Canada, and a one-year standstill agreement Ramelius and Westgold had in place from November. Expectations are that once the panel examines the application, it will be thrown out.

Ramelius closed down 7 per cent on Wednesday and Westgold up 6.5 per cent.

Ramelius owns two production and processing hubs at Mt Magnet and Edna May, both located in Western Australia and is developing its Rebecca and Cue Gold Projects.