Australian mining multinational BHP recently abandoned its bid for London- and Johannesburg listed Anglo American after the target company rejected the latest offer.
“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 quoted CEO Mike Henry as saying.
“Despite seeking to engage constructively and numerous requests, we were not able to access from Anglo American key information required to formulate measures to address the excess risk they perceive,” the statement also quoted Henry as saying.
Anglo warned earlier on the same date that it would not extend talks with BHP. The prospective transaction’s collapse followed the company’s rejection of a third proposal from BHP on May 22, after receiving it on May 20.
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Anglo American Claims Deal “Undervalued” Company
Besides raising Anglo’s valuation by 25% to £39 billion ($49.5 billion) from the initial offer in late April of £31.1 billion ($39.5 billion), BHP’s latest offer also stipulated 0.886 BHP shares, plus ordinary shares in Anglo American Platinum and Kumba Iron Ore. However, Anglo stated that this latest offer significantly undervalued the company.
“The terms of the latest proposal represent a total value, based on undisturbed share prices as at market close on April 23, 2024, of approximately £29.34 [$37.31] per Anglo American share,” the company stated. “On the basis of the 30-day and 90-day volume weighted average share prices up to and including April 23, 2024, the terms of the Latest Proposal would value Anglo American at £29.91 [$38.03] and £29.67 [$37.73] per Anglo American share, respectively.”
BHP’s condition that Anglo American demerge its platinum and iron ore assets was also another point of contention. On May 22, the company stated that “The requirement to pursue two contemporaneous demergers of publicly listed companies alongside a takeover and the inter-conditional nature of the three transactions is unprecedented, and as a result of a takeover would result in additional material approvals and conditions, particularly in South Africa.”
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Copper Assets Proved the Main Reason for the Buyout Attempt
BHP’s primary interest in Anglo was its copper assets. Analysts continue to warn markets of lower supply availability as we approach the decade’s end. Sources noted that authorities in Chile would also need to give their approval of such a sale, as Anglo American has several assets in the South American state.
Chile is the world’s top copper producer, accounting for 24% of global production. These figures stem directly from U.S. Geological Survey data as stated by the International Trade Administration, an agency within the U.S. Department of Commerce.
The company noted that Anglo American has four operating assets in Chile, including the Collahuasi, El Soldado, and Los Bronces mines. This is in addition to a smelter at Chagres. Information from Anglo American’s website notes that Collahuasi has reserves of 3.93 billion metric tons of ore grading 0.66%, while Los Bronces has 3.13 billion metric tons at 0.32%.
On May 14, Anglo American announced its plans to divest itself of several assets following a 2023 review of its portfolio. These divestitures would include steelmaking coal sites in Queensland, Anglo American Platinum and possibly the De Beers diamond subsidiary.
BHP first approached Anglo American on April 26 with an all-share offer, which valued the latter company at £31.1 billion. However, the latter rejected the offer on the grounds that – much like the subsequent offer – it significantly undervalued the company.
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