BHP has made an all-share offer for Anglo American which valued the company at US$40.7 billion, conditional upon separate demergers by Anglo American by distribution of its entire shareholdings in Kumba and Anglo-American Platinum Limited to Anglo American shareholders. Anglo American’s board has unanimously rejected the proposal from BHP on the basis of valuation and uncertainty associated with the complex structure proposed.
There was much speculation following Anglo American’s annual results that a bidder may emerge for all or part of the company. Anglo had been seeking partners to refinance its operations across its segments with its Woodsmith Polyhalite project most pressing.
This is the largest bid BHP has made since its failed takeover offer for Potash Corporation of Saskatchewan in 2011 and surpasses Glencore’s bid for Teck at US$23 billion last year. At the bid price, it would be the largest-ever mining transaction in nominal terms.
At a ratio of 0.7097 plus stakes of the listed entities, BHP would have been a 11% premium to Anglo American’s closing share price on 24 April. BHP’s share price was down 2.2% in UK trading on the day of announcement, underperforming Rio Tinto (-1.6%). Meanwhile Anglo American’s share price closed above the offer price – up 16.1% on the day.
And with one swoop of equity, if successful, BHP would return to the helm as the world’s largest copper miner and gain a strategic boost in high-quality iron ore and metallurgical coal production. The question remains: what will it do with the rest of the Anglo-American portfolio? This may be the hurdle to a further bid, but the ball is now firmly in BHP’s court.
If the deal goes through, BHP will reclaim its position as the world’s largest miner, surpassing its closest competitor, Rio Tinto. BHP has been “shrinking to greatness” by exiting oil and gas and reducing its coal presence. Even without Kumba and Anglo-American Platinum, BHP will reverse this trend and move well ahead of its peers.
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