BHP walks away from $75b takeover bid after Anglo rejects push for more talks

BHP has abandoned its $75 billion takeover bid for rival Anglo American after a plea to extend takeover talks was turned down.

The Australian mining giant officially ended its six-week chase by saying it would not be making a formal bid for London-based Anglo after failing to secure an extension to a deadline to commit to a binding offer.

A key sticking point to any deal is BHP’s complicated transaction structure.Credit: Michele Mossop

“While we believed that our proposal for Anglo American was a compelling opportunity to effectively grow the pie of value for both sets of shareholders, we were unable to reach agreement with Anglo American on our specific views in respect of South African regulatory risk and cost,” BHP said in a statement, less than an hour before the deadline of 2am AEST.

“We remain of the view that our proposal was the most effective structure to deliver value for Anglo American shareholders, and we are confident that, working together with Anglo American, we could have obtained all required regulatory approvals, including in South Africa,” it added.

The mining giants had been locked in crucial negotiations for the past week after a dramatic month in which BHP increased its offer three times before finally convincing Anglo American’s board to engage with its proposal, in the process gaining an extra week from UK regulators to hammer out a deal.

BHP boss Mike Henry flew into London for eleventh-hour meetings ahead of the deadline.

“BHP believes a further extension of the deadline is required to allow for further engagement on its proposal,” the company said in an update released on Wednesday at 4pm AEST.

But soon after BHP released its request, Anglo rejected it.

Anglo said it had engaged extensively with BHP and its advisers about the deal’s structure and associated execution and value risks for its shareholders over the past week.

BHP chief executive Mike Henry.Credit: Wayne Taylor

BHP shares declined on Thursday, finishing the session 1.7 per cent lower at $44.30.

The world’s largest miner didn’t change its final offer of 0.8860 BHP shares for each Anglo share, but had made further commitments to get the deal across the line. They included a reverse break fee if the complex demerger BHP required as part of the deal failed and social undertakings for the South African business.

A key sticking point remained BHP’s complicated transaction structure, which required Anglo to offload majority holdings in its South African platinum and iron ore businesses before a merger could go ahead.

Anglo says that process would take about 18 months, by which time it expects its own restructuring plan to divest its less profitable coal, nickel, diamond and platinum operations, announced in a flurry two weeks ago by chief executive Duncan Wanblad to counter BHP’s bid, will be completed.

It argued the demerger created too much risk for its own shareholders and wanted BHP to change the deal’s structure or compensate its shareholders for any loss of value as a result of spinning off the assets.

”While we believe an acquisition of Anglo would be a longer term positive for BHP, the fact that BHP is being disciplined in its approach is a near-term positive for its shares,” Jefferies analyst Christopher LaFemina told Reuters.

“That said, we are surprised BHP did not have a plan to overcome the clear structural issues relating to this deal.”

Barrenjoey analyst Glyn Lawcock, a veteran BHP watcher, gave Henry a tick. “He saw an opportunity” and had bid against himself twice.

“BHP can sit in the back row for a little while and contemplate what they do,” Lawcock said. Anglo’s new strategy may simplify the business over the next six months, giving BHP less to do if interested down the track, or it might look at other copper acquisitions, he added.

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