BHP walks away from Anglo American takeover, raising questions over growth strategy
Mike Henry-led BHP is facing questions about its strategy and direction after abandoning its latest takeover bid for Anglo American.
BHP has backed out of buying smaller miner Anglo American for the second time in 18 months, looking inward for growth while it rides out tense contract talks with its biggest iron ore customer.
Mike Henry-led BHP said on Monday that it had held preliminary discussions with the Anglo board, but was no longer considering an offer.
“Whilst BHP continues to believe that a combination with Anglo American would have had strong strategic merits and created significant value for all stakeholders, BHP is confident in the highly compelling potential of its own organic growth strategy,” it said.
Anglo is understood to have given the cold shoulder to the latest approach from BHP that would likely have had consequences for its investments in copper and coal in Australia.
Analysts previously speculated that BHP would need to rely even more heavily on its iron ore operations in WA for the cash flow to help finance an acquisition of Anglo. This time, there are concerns about activity in the Chinese economy and BHP’s commercial relationship with a powerful state-owned buyer of the key steelmaking ingredient.
The latest BHP approach comes 18 months after it walked away from a previous takeover bid motivated by a desire for the target’s copper assets.
The fact BHP re-entered the takeover fray, even in a half-hearted manner, has raised speculation it could spur Rio Tinto into action under new chief executive Simon Trott. Anglo and Teck Resources are in the throes of a merger deal, and Glencore boss Gary Nagle has separately talked up mega-deals in the mining sector.
BHP faced strong opposition from the Anglo board when it last came knocking with what was at the time a $74bn takeover bid. Anglo subsequently pushed with a restructuring plan and asset sales, and pursued the planned $88bn merger with Teck.
It appears the management and board of BHP did not want to have any regrets despite more recently talking up internal growth options in copper.
Current chairman Ross McEwan and chief development officer Catherine Raw only joined BHP in April 2024, a month before the previous bid was abandoned.
Mr McEwan took the reins as chairman at the end of March this year, while Ms Raw, who has responsibility for mergers and acquisitions, started during the five-week battle for Anglo.
The Teck tie up has won support from influential Anglo backers, with shareholders of the two companies scheduled to vote on the deal on December 9.
BHP declined to comment on reports suggesting the latest offer for Anglo was a combination of cash and shares, but was deemed inferior to the Teck combination by the Anglo board chaired by Stuart Chambers.
Anglo’s market value has climbed to £31.9bn ($64.7bn), while BHP is valued at more than $201.3bn and its share price has declined over the past two years.
Macquarie analysts noted that copper was trading 4 per cent higher and iron ore 13 per cent lower than when the initial talks broke down. They said BHP may have felt compelled to act before the December 9 vote.
Macquarie said BHP may have been driven by concerns its scrip could depreciate ahead of any subsequent takeover offer for Anglo or the combined Anglo-Teck entity. The theory is based on a potentially weaker iron ore outlook, BHP’s copper growth challenges and its standoff with Beijing’s iron ore buyers’ group.
“While BHP has announced that it will no longer be pursuing a combination of the two companies, we note the action does open a door we previously considered closed,” Macquarie said in a note to clients.
The previous bid was criticised as too complex, and BHP was unable to convince the Anglo board of the merits of a structure that required Anglo to shed its South African platinum and iron ore interests ahead of the broader deal.
Anglo also claimed the BHP bid undervalued its business, and has since rolled out its own restructuring plan under chief executive Duncan Wanblad. Anglo has exited the South African platinum business, but a deal to sell its coal mines in Queensland to New York-listed Peabody Energy is now bogged down in legal action.
A successful bid for Anglo aimed at growing copper assets in South America would likely have affected BHP’s capital allocation and plans for Australia. It has already put a freeze on investing in the growth of its Queensland steelmaking coal business because of the state’s high royalty regime.
In South Australia, BHP revealed in August that it would delay making a final investment decision on a big expansion at the Olympic Dam copper operation until 2028 as it weighed up spending priorities across the company.
BHP is currently walking a tightrope with China Mineral Resources Group, with steel mills instructed not to buy two types of BHP product exported from WA.
There is also widespread speculation about the future of Mr Henry, who is expected to be succeeded in 2026.
BHP closed up 0.6 per cent at $40.62 on Monday.
BHP is now subject to standstill provisions for six months under UK takeover law unless there is a competing offer for Anglo, a material change, Anglo agrees to re-engage or the takeover panel allows talks.
The BHP growth options in copper include what some inside the company are now referring to as the A4: Argentina, Arizona in the US, Antamina in Peru and Australia.
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