BHP’s move on Anglo American is rapidly turning into a game of brinkmanship, as the UK Takeovers Code prevents either company from saying much about the offer. But, with BHP signalling its willingness to walk away, what happens from here?
Since the news of the bid leaked to the market in late April, both companies have been prisoner to the rules of the UK Takeovers Code, which prevents either company publicly talking to the offer, lobbying shareholders directly, or much of any of the other fun takeover stuff.
BHP thinks the bid was deliberately leaked by Anglo – and the news of the approach was clearly to the advantage of the target company, not BHP.
Anglo’s confirmation set a 28-day clock on a formal offer from BHP, which has until May 22 to put up or shut up – either to make a formal and binding offer, or notify the market it will not do so.
Only Anglo can extend that deadline – and that would need chairman Stuart Chambers to pick up the phone to BHP chair Ken MacKenzie and invite BHP to the table for formal talks.
Two swift rejections of BHP’s initial moves, along with the accelerated release of Anglo’s own restructuring plans, suggest that isn’t going to happen without substantial pressure from its own shareholders.
There is no real sign of that, and in any case it would represent a humiliating backdown that would probably cost the Anglo board their jobs and reputations.
To ramp up that pressure, BHP is now clearly signalling it won’t make a formal offer unless Anglo comes to the table to answer some basic due diligence questions – the kind OZ Minerals allowed after initially rebuffing BHP’s first approach. Newcrest followed a similar line with Newmont last year.
BHP chief executive Mike Henry is not the kind of CEO to make tub-thumping speeches, but his presentation to the Bank of America conference overnight on Tuesday is the most animated he has been in promoting BHP’s record in a long time.
And there is a kind of rhythm to his carefully crafted messages. Henry racked up 16 uses of the word “disciplined” in his half-hour talk at BofA – code for “bugger off, we’re not paying that much” in anyone else’s language.
It is the decision BHP made when walking away from its bidding war with Andrew Forrest for Canadian nickel play Noront Resources and, in hindsight, Henry will be pretty chuffed that Forrest was left holding the bag when the bottom dropped out of the nickel market last year.
Anglo’s copper assets are a bigger prize, however. Precluded from directly lobbying Anglo’s biggest shareholders, Henry’s BofA presentation was both a pitch of BHP’s credentials and a warning that a successful takeover would be nice, but not necessary.
Anglo, in turn, is clearly aiming to either shake loose a knockout bid from its rival, or else hoping BHP will quietly go away.
And if BHP does the latter, what happens then?
It would put BHP in a tricky situation. Having put Anglo in play, BHP would be prohibited from publicly instigating a return bout for six months. BHP would be allowed a single attempt to invite another set of confidential discussions within that period, although that seems unlikely, given the reception to its initial approach.
And BHP would be allowed back in the game if a rival put forward a public offer for Anglo – but again, to do that BHP would almost certainly want access to the kind of basic due diligence talks that Anglo has already spurned.
It is not entirely clear what would be allowed if Anglo made an outbound offer to a smaller rival such as, say, First Quantum Minerals.
That is an unlikely prospect, granted, given Anglo’s ability to deliver on its current plans will be getting close scrutiny from major shareholders weighing the BHP alternative. But plenty of company boards have made dumber decisions for worse reasons.
But Anglo is in the driver’s seat – either BHP walks away, or bumps its offer in a blind bid that could lead to disaster, and permanently tarnish Henry’s record. And worse, if BHP rolls the dice and makes a formal bid and fails, it would be forbidden to return to the table for a year, by which time the game may be over completely.
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