Anglo American rejects enhanced £34bn offer from BHP

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Anglo American has rejected an enhanced takeover bid from rival BHP that values ​​the UK-listed miner at £34bn, sharpening the battle between two giants of the global mining industry.

The Australian group said on Monday that a new non-binding all-share offer from BHP valued its smaller rival at £27.53 per share – up from about £25 per share in the original offer last month.

BHP’s latest offer represents a 15 per cent increase in the merger ratio on its previous proposal, according to BHP, and about a 30 per cent premium to Anglo’s share price before the takeover talks became public.

BHP said it was “disappointed that Anglo American’s board has chosen not to participate”. The Australian mining company said this new approach falls short of a firm intention to submit a bid, and it has until next Wednesday to decide whether to submit a formal bid.

Anglo said in a statement that its board assessed that BHP’s revised non-binding offer still “significantly” understates the value of the company’s assets and prospects, reiterating that the structure is “wholly unattractive” to shareholders. Last month, it rejected its first unwanted £31bn takeover from BHP on similar grounds.

Anglo shares fell 2.4 percent to £27.07 in London, giving the company a market value of £37 billion.

Details of BHP’s latest approach, which comes a day before a major industry gathering in Miami, have put pressure on Anglo’s chief executive, Duncan Wanblad, to prove that an independent strategy would deliver better returns for investors.

BHP is eyeing Anglo’s copper mines in Latin America: a merger between the two groups would create the world’s largest producer of the metal that is crucial to global decarbonisation efforts. It would also expand BHP’s footprint in iron ore and coal in the steel industry. The deal will be the largest in the mining sector ever.

BHP Chief Executive Mike Henry said on Monday that the “win-win” proposal would have brought Anglo shareholders’ total ownership in the combined company to 16.6 per cent, compared with 14.8 per cent under the first indicative offer.

However, the new proposal maintained a clause requiring Anglo to spin off two South African companies ahead of the deal – which sparked a backlash from Pretoria.

When contacted by the Financial Times on Monday, South Africa’s state-owned Public Investment Corporation, which is Anglo’s second-largest shareholder, confirmed that mining was “an important part of the South African economy, affecting a wide range of stakeholders”. Any bid “will need to take these factors and long-term sustainability into account”.

BHP said it still “believes that combining the two companies will provide significant value to all shareholders.”

“We are disappointed that this second proposal was rejected,” Henry said.

“BHP clearly reserves the right to take an aggressive stance,” said Mark Kelly, chief executive of MKP Advisors.

George Cheveley, portfolio manager at Ninety One, a shareholder in Anglo and BHP, said his initial reaction to the revised proposal was that “we need to wait and see what Anglo’s plan is.”

Since December, when Anglo shares suffered their worst single-day decline, Wanblad has promised to deliver a plan to overhaul the sprawling producer of iron ore, platinum, copper and other metals after conducting a systematic review of the assets. Anglo said it would present those plans on Tuesday.

Some investors expected that the company, which was founded 107 years ago in South Africa, would be bought or broken up. Anglo’s challenges have also attracted activist hedge fund Elliott Management, which has built a significant stake in the company.

BHP said there would be “beneficial synergies” without specifying a figure. Analysts at RBC said they estimated a bid of more than £30 per share would be needed to influence all Anglo shareholders.

In its new proposal, BHP added that it would hand up to two board seats to Anglo, as well as clarifying that it would bear the costs of consolidating units in South Africa. This would include a $2 billion capital gains tax charge on South Africa, according to people familiar with the matter.

Additional reporting by Lukanyo Mnyanda