Former BHP chair Don Argus urges Anglo American to hold talks
Don Argus says Anglo American ‘does not warrant’ a higher bid, and the Anglo board should come to their senses and begin talks with his successor at the Australian mining giant.
Former BHP chairman Don Argus says Anglo American “does not warrant” a higher bid, and the Anglo board should come to their senses and begin talks with his successor at the Australian mining giant.
With the May 22 deadline for BHP to make a final offer for Anglo American approaching, BHP is weighing up whether it should lift its offer one more time to try to encourage the Anglo board into engaging over the takeover play, or walk away.
Mr Argus, who was chairman of BHP from 1999 to 2010, said BHP’s move on Anglo made sense for shareholders of both companies – including him.
“I hope the Anglo board comes to their senses and starts to think hard about the deal,” Mr Argus said.
“As a shareholder of Anglo I think they haven’t performed and in my view they don’t warrant a higher bid from BHP.”
The 85-year-old mining veteran said he had stakes in both companies and did not want to see the $64bn offer fail.
“BHP have got their strategy and they know what they’re doing. Why abandon something that starts out as part of your strategic direction?” he said.
“There’s a very strong discipline in BHP that if you don’t make your way to that average weighted capital then you don’t have growth prospects.”
BHP shares closed up 1.9 per cent at $45.72 on Monday. The stock is up 1.1 per cent since the company launched its takeover tilt for Anglo on April 25.
BHP chief executive Mike Henry said last week the decision of the Anglo board to knock back BHP’s offers without engaging in direct talks with its suitor meant the matter was in the hands of Anglo shareholders.
The company has also made it clear it is prepared to walk away unless it can hold at least basic talks with the Anglo board about the offer. But as BHP considers its options ahead of Wednesday’s “put up or shut up” deadline, analysts say a final rise is still possible.
Britain-based Liberum Capital analyst Ben Davis said in a client note that he believed BHP still had multiple options available to get the Anglo board to the table, and he expected BHP to make another offer before the deadline. Mr Davis said a “very large premium” to the existing offer would be enough to win engagement and stop the clock on the requirement to make a formal bid by May 2022.
“A very large premium to the existing offer would certainly help start conversations with Anglo American board and shareholders,” Mr Davis said.
“Some market participants have said that £30 ($50.90) per share as a starting point, a 42 per cent premium to the undisturbed price.”
BHP’s current offer values Anglo at £29.45 per share, which includes the majority stakes it holds in listed South African companies.
Anglo’s major objection has been BHP’s insistence that it organises the sale of its South African iron ore and platinum assets before its shareholders vote on the BHP offer, and Mr Davis said BHP could still consider a “radical change” to the structure of that offer – perhaps through a joint bid with another rival for all of Anglo’s assets.
Glencore is the most obvious partner given its attraction to iron ore and focus on platinum-metals recycling, Mr Davis said.
He said BHP could also simply let its current offer lapse and return to the fray when the market had had more time to assess the success of Anglo chief executive Duncan Wanblad’s radical plan to reshape the company.
Anglo’s board first rejected BHP’s offer on April 26.
JPMorgan analyst Patrick Jones valued the shares in his Copper Deep Dive report at £32, which was 30 per cent higher than BHP’s original offer.
Mr Jones said Anglos’ copper business should be valued at £17.47 on its own, whereas BHP’s current bid values the copper, coal and iron ore businesses at £19.13.
“We reiterate our view that BHP’s offer undervalues both Anglo’s copper division and Anglo American in its entirety,” he noted.
Once the May 22 deadline passes, BHP must either make a firm bid for Anglo, or publicly say it will not do so. BHP will then be prevented from making a return bid for six months, except with the approval of the UK Takeovers Panel.
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