Anglo American Plc on April 26 rejected a $39 billion takeover proposal from mining giant BHP Group, saying it significantly undervalues the company, Bloomberg reported.
Under the proposed all-share deal, Anglo would first spin off controlling stakes in South African platinum and iron ore companies to its shareholders before being acquired by BHP. The total per-share value of the nonbinding proposal was about £25.08, BHP reported on April 25.
Anglo’s rejection was widely expected. Analysts and some Anglo investors had seen BHP’s proposal as well below the sort of price that would bring the 107-year-old miner to the table. BHP will now have to improve its offer if it wants to start talks.
“The BHP proposal is opportunistic and fails to value Anglo American’s prospects,” Anglo Chairman Stuart Chambers said in a statement.
Just two years ago, Anglo was trading at almost £43 a share, but it has been battered by major operational and market setbacks. Anglo shares were steady in London after jumping 16% on April 25.
A tie-up with Anglo would give BHP roughly 10% of global copper mine supply ahead of an expected shortage that many market watchers predict will send prices soaring. If successful, the transaction would mark a return to large-scale dealmaking for BHP, while potentially flushing out other suitors aiming to boost their exposure to the metal that’s closely linked to the global energy transition.
Anglo has long been viewed as a potential target among the largest miners, particularly because it owns attractive South American copper operations at a time when most of the industry is eager to add reserves and production. Still, suitors have been put off by Anglo’s complicated structure and mix of other commodities, from platinum to diamonds, and especially its deep exposure to South Africa.
BHP had sought to navigate that challenge by insisting that Anglo separate its two South African units as a condition of a takeover. That suggestion was also dismissed by Anglo on April 26, with the company saying it was unappealing to its investors.
“The proposed structure is also highly unattractive, creating substantial uncertainty and execution risk borne almost entirely by Anglo American, its shareholders, and its other stakeholders,” Chambers said.
Within 24 hours of BHP’s pursuit coming to light, South Africa – as many have always expected in a deal involving Anglo – has started to move to center stage. South Africa’s state-owned pension fund is Anglo’s biggest shareholder and yesterday the country’s mines minster signaled his opposition to the deal.
Both BHP and Anglo have spent billions as they each move into the fertilizer business. BHP reported on April 18 that its Jansen Stage 1 potash project in Saskatchewan remains ahead of its initial schedule and is now 44% complete (GM April 19, 2024). The first production target is the end of calendar year 2026. Capital expenditures are expected to be $5.72 billion with capacity of 4.15 million mt/y. Stage 2 is expected up in fiscal year 2029 and would add another 4.36 million mt/y and $4.86 billion in capital expenditures.
In the meantime, Anglo has been working hard to identify “the right partner, structure, and opportunity,” to help share the cost of its giant Woodsmith polyhalite project in North Yorkshire in northeast England (GM March 1, 2024). Operations are expected to initially be 5 million mt/y, with the company seeing a clear pathway to 13 million mt/y. First production is expected in 2027.
“If BHP’s bid for Anglo American results in a deal, it could boost competition in the potash market later this decade by creating a diversified player that can challenge the existing oligopoly,” said Alexis Maxwell, Green Markets Director of Research.
“Acquiring Anglo’s Woodsmith mine – now awaiting Board approval – could add 5 million mt of a specialty potash product to BHP’s book,” Maxwell added. “Additional capital spending on the unproven specialty potash blend, Poly4, remains unclear after a $1.7 billion writedown on the project in 4Q (GM Feb. 24, 2023), but it could be around $9 billion.”