Anglo American says BHP’s takeover offer ’significantly undervalues’ its assets
Anglo American has sent BHP back to the drawing board over its ‘opportunistic’ lowball offer for the mining giant.
Anglo American has knocked back BHP’s £21bn ($40.5bn) takeover offer, saying the mining giant’s all-scrip bid “significantly undervalues” Anglo’s assets.
The speed of Anglo’s rejection of the BHP bid suggests the company is prepared to pay hardball over any future talks with its bigger counterpart, just 24 hours after BHP disclosed details of its bid to the London Stock Exchange.
The swift knock-back came after BHP shareholders expressed their displeasure with the prospect of a large and dilutionary acquisition, sending BHP shares tumbling more than 4.5 per cent to close at $43.15 on Friday.
Anglo chairman Stuart Chambers released a statement to the London Stock Exchange late on Friday, Australian time, saying that BHP’s bid was opportunistic and fails to value Anglo’s assets fairly.
“Anglo American is well positioned to create significant value from its portfolio of high quality assets that are well aligned with the energy transition and other major demand trends,” he said.
“The BHP proposal is opportunistic and fails to value Anglo American’s prospects, while significantly diluting the relative value upside participation of Anglo American’s shareholders relative to BHP’s shareholders.”
Mr Chambers said BHP’s proposed structure, which would require Anglo to distribute its holdings in Amplats and Kumba iron to shareholders before inking a deal with BHP, put would create “substantial uncertainty and execution risk borne almost entirely by Anglo American, its shareholders and its other stakeholders”.
Anglo American said its shareholders needed to take no action in relation to BHP’s proposed bid, and should wait for the mining giant to either vacate the field or make a firm offer – which it must do before May 22 under the UK’s takeovers rules.
BHP confirmed it had made an offer for Anglo to the London Stock Exchange late on Thursday, saying it would offer 0.7097 BHP shares for each Anglo share on issue.
The deal is conditional on the spin-out of Anglo American’s shares in platinum and iron ore assets in South Africa to Anglo’s existing shareholders.
The deal would value Anglo shares at a total value of £31.1bn – but BHP will pay only for the assets it wants. In total, the offer valued Anglo shares at £25.08 each at their relative trading price when it was made, including £4.86 in Anglo Platinum shares and £3.40 in Kumba shares – effectively meaning BHP was offering £16.82 for the portion of Anglo that it wants.
If successful, it would be the biggest deal in BHP’s history and one of the year’s biggest merger and acquisition deals across any sector.
BHP’s offer is primarily aimed at capturing Anglo’s prized copper mines in Chile and Peru, collectively expected to produce 730,000 to 790,000 tonnes of copper in 2024 despite a savage 200,000 tonne downgrade announced in December.
But it would also deliver BHP a dominant position in Queensland’s Bowen Basin coking coal district, as well as a high-grade iron ore operation in Brazil.
Anglo had a horror year in 2023, weighed down by tumbling prices in its De Beers diamond division and platinum and palladium metals group (PGMs). In 2022 its PGMs division delivered underlying EBITDA of $US4.4bn, and diamonds $US1.4bn.
For 2023 those fissures were $US1.2bn and $US72m respectively.
Over the year Anglo shares tanked from about £35.50 in mid-January to as low as £16.70 in December, when its shares dived after a major copper production downgrade.
BHP’s bid values Anglo at £25.08 a share, including the unwanted stakes in Amplats and Kumba Iron.
Wood Mackenzie Metals and Mining Corporate Research Director Janes Whiteside said on Friday BHP’s offer was unlikely to satisfy Anglo American shareholders who see the long term value of the company’s portfolio.
“The deal would represent the biggest shake-up of the global mining industry in more than a decade,” he said.
“But Anglo American shareholders may consider fair value closer to the share price in 2023 before operational issues emerged and other suitors may be compelled to act at this price.”
RBC Capital Markets analyst Marina Calero said on Friday the swift rejection was not surprising, given the initial valuation was a relatively slim 17 per cent premium to analyst consensus net valuation of Anglo’s assets.
“Based on yesterday’s closing prices, BHP’s offer would imply an offer price of £24.20 a share,” she said in a client note.
“This is about 6 per cent below Anglo’s closing price yesterday of £25.60, suggesting the market expects an uplift in premium. We see today’s rejection as confirmation that a higher premium will likely be required for the deal to close.”.
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