Anglo rejects BHP sweetener, but door’s open

Mining giant BHP has one week to woo Anglo American, which has agreed to talks after rejecting its persistent suitor’s latest ‘final’ near-$74bn takeover bid.

BHP has an extra week to convince the Anglo American board it should try to make two complex divestments work, after the target’s board invited the Australian mining giant to the table in the face of a “final” offer carrying a $74.2bn total valuation.

Anglo’s board rejected the offer overnight on Wednesday, saying it could not accept BHP’s insistence the company divest its shares in South African-listed Amplats and Kumba Iron ahead of any shareholder vote on the proposal.

But the Anglo board blinked in the face of BHP’s ‘final’ offer – in which Anglo shareholders would emerge with 17.8 per cent of the merged group, or 0.8860 BHP shares for each Anglo share on issue.

The offer is a 24.8 per cent lift on BHP’s initial bid for the South African mining house, and would ultimately lift the portion on offer to Anglo shareholders from 14.8 per cent to 17.8 per cent.

BHP says the latest bid values Anglo shares at £31.11, including £5.40 in Amplats shares and £4.23 in Kumba shares – £38.6bn ($74.2bn) in total.

BHP now has a week of talks with the Anglo board to settle the issue of the structure of the deal, including the option for a further lift in the offer price.

The issue of the Amplats and Kumba divestments remains a significant sticking point, however, with the Anglo board unanimously rejecting BHP’s latest bid – but extending the deadline for BHP to make a firm offer under the UK Takeovers Code until May 29.

Anglo chairman Stuart Chambers said BHP’s structure still remained unacceptable, and still fell short of Anglo’s valuation of its own assets – despite confirming the company had at least engaged in some talks with its bigger rival since BHP lobbed its latest offer on May 20.

“The board is confident in Anglo American’s standalone future prospects and believes that Anglo American has set out a clear pathway and time frame to deliver the acceleration of its strategy to unlock significant and undiluted value for Anglo American’s shareholders,” he said.

“The board considered BHP’s latest proposal carefully, concluded it does not meet expectations of value delivered to Anglo American’s shareholders, and has unanimously rejected it. In particular, it does not address the board’s concerns about the structure, which results in significant complexity, execution risks, an extended timeline to completion and consequently has the potential for material value leakage to be disproportionately suffered by Anglo American’s shareholders.

“Multiple engagements with the BHP team have not yet been able to resolve the concerns on these issues.”

Mr Chambers said the board still believed that Anglo’s radical plan to tear itself apart – including the divestment of Amplats – would ultimately deliver a better long-term deal for Anglo’s shareholders.

BHP boss Mike Henry said the company’s latest offer was a significant improvement on its initial approach and offered both “ immediate value for Anglo American shareholders and allow them to benefit from the long-term value generation of the combined group”.

“BHP looks forward to engaging with the Board of Anglo American to explore this unique and compelling opportunity to bring together two highly complementary, world class businesses,” he said in a statement.

BHP’s latest offer has finally brought the Anglo board to the table, and South Africa’s Public Investment Corporation (PIC) – Anglo’s biggest shareholder – also offered some hope on Wednesday night that a conditional deal could be done.

But that could be conditional on BHP restructuring its offer to allow a secondary listing on the Johannesburg stock exchange, with PIC chief executive Abel Sithole saying offers from BHP “should reflect both the embedded value of existing Anglo assets and the future optionality and benefits that BHP can derive, specifically from Anglo’s unlisted assets”.

“This would require a meaningful revision of the current BHP proposal that should take into consideration the material risks that current shareholders of both Anglo and its subsidiaries would have to assume over an extended time frame,” he said.

“In addition, there has to be future and perpetual participation by South African shareholders in the acquired assets through the JSE.”

Anglo shares softened slightly in overnight trading, closing down to £26.62.