BHP rebuffed over sweetened $64bn Anglo bid

Anglo American has rebuffed a sweetened buyout from BHP that would have delivered a 15 per cent premium from the Australian giant’s initial offer that would have consolidated BHP as the world’s biggest miner.

BHP made its initial approach to Anglo American last month. Picture: Rebecca Le May

Anglo American has rebuffed a sweetened buyout from BHP that would have delivered a 15 per cent premium from the Australian giant’s initial offer, with the London-headquartered miner dismissing the new approach as “undervaluing” its prospects.

The mega deal places a new value on Anglo of £34bn ($64.4bn), and comes less than a month after the iron ore major made its initial £31.1bn pitch to combine the two companies in a move that would have consolidated BHP’s position as the world’s biggest miner.

The structure of the deal involving the spin-off of Anglo’s South African operations, remained the same under the new terms, and this looks to be a key sticking point for any deal moving ahead.

BHP said the board of Anglo American had rejected the approach, which was made last week, and it is “disappointed” the rival miner has declined to enter into further talks over the improved terms.

BHP CEO Mike Henry. Picture NCA NewsWire/Aaron Francis

Anglo American chairman Stuart Chambers said early Tuesday (AEST) the new deal “fails to recognise the value inherent” in Anglo American and its future prospects.

In a statement Anglo said the latest proposal “continues to contemplate a structure which the Board believes is highly unattractive for Anglo American’s shareholders, given the uncertainty and complexity inherent, and significant execution risks”.

“The requirement to pursue two contemporaneous demergers creates significant uncertainty, which falls disproportionately to Anglo American shareholders,” Anglo added.

BHP’s new approach would have given Anglo shareholders a slightly bigger slice of BHP under the share-based deal. While short of a knockout bid, it still raises the pressure on the UK miner’s board to show it can deliver better value by going it alone.

BHP also offered Anglo more say in the merged company with the offer of up to two board seats under the revised deal.

The move is also a sign that BHP remains serious about the combination of the two mining majors that will see the Australian company gain control of some of the last significant operational copper mines that are on the market. The merger would also deliver potash assets in the UK, iron ore mines in Brazil and high quality metallurgical coal mines in Queensland.

It also follows feedback from some of Anglo’s big investors, who were concerned of a lowball initial approach.

The sweetened deal, which continues to be offered through BHP scrip, values Anglo American at £27.53 per share. This represents a 37 per cent premium to the average of analyst values on Anglo’s shares prior to details of the initial BHP bid emerging late last month.

Anglo’s shares were trading at £27.69 in early trade in London.

“BHP put forward a revised proposal to the Anglo American board that we strongly believe would be a win-win for BHP and Anglo American shareholders. We are disappointed that this second proposal has been rejected,” said BHP’s chief executive officer Mike Henry.

“BHP and Anglo American are a strategic fit and the combination is a unique and compelling opportunity to unlock significant synergies by bringing together two highly complementary, world class businesses,” he said, adding BHP would bring its track record of “operating excellence” to maximise returns.

Under the new merger ratio, Anglo American shareholders’ would emerge with total ownership of 16.6 per cent of the combined group from 14.8 per cent in BHP’s first proposal.

Mr Henry said the revised offer represents “fundamental value” of Anglo American and BHP, although the miner will remain disciplined when it comes to mergers.

The bid continues to rely on the spin-off of Anglo’s 79 per cent stake in South Africa’s Anglo Platinum and the separate sin off of the 70 per cent owned Kumba mining operations also based in South Africa. The valuation of both African companies remains unchanged under the revised deal.

Anglo has come under pressure from investors after a horror year, weighed down by falling prices for diamonds, platinum and palladium.

Anglo American’s Queensland metallurgical coal mines have been under scrutiny since an explosion at its Grosvenor underground operation in 2020 almost killed several workers, and it only returned to production in 2022.

And its stock was hit badly in December due to a savage downgrade of copper production, when Anglo – now under the leadership of former strategy director Duncan Wanblad – cut 200,000 tonnes of copper from its expected 2024 production, largely due to geological issues at its Quellaveco mine in Peru (a key growth asset) and the need to refit a processing plant at the Los Bronces mine in Chile.

Anglo American chief executive Duncan Wanblad.

Anglo’s shareholders have been critical of the complexity of the miner, with its disparate assets. Mr Wanblad outlined a full review of operations in February, at the time declaring: “Every asset in the portfolio has to play its role.”

Following BHP’s approach Anglo American has fast-tracked plans for delivery of its strategy briefing and will provide an investor update on Tuesday in London.

Originally published as BHP rebuffed over sweetened $64bn Anglo bid