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Anglo American has extended talks with BHP over a takeover bid, keeping the prospect alive of the largest-ever deal in the mining sector, even after the UK-listed group rejected a third £38.6bn approach.
BHP now has until 5pm UK time on May 29 to make a formal bid for its smaller rival after increasing the number of shares on offer to Anglo investors in its third and “final” deal proposal.
Anglo will continue to engage with BHP for a further week, despite saying that it continues to hold “serious concerns” about the complex deal structure that requires it to spin off two South African units.
The extension keeps alive BHP’s hopes that it can still secure a deal that would transform the global mining industry and give the Australian company access to more copper, a metal vital for decarbonisation.
BHP said in a separate statement on Wednesday that its third all-share offer valued Anglo at £31.11 a share based on the May 22 closing price and that this represented its “final offer ratio”.
The statement added that under UK takeover rules the offer could be increased under certain conditions, such as Anglo’s board agreeing to recommend a higher bid, or a bid from a rival company for Anglo. However, BHP does not intend to improve the share offer or alter the structure of the deal, according to people familiar with the company’s plans.
Anglo’s board unanimously rejected the third proposal. Chair Stuart Chambers said the bid “does not meet expectations of value delivered to Anglo American’s shareholders” but that the board was “willing to continue to engage with BHP and its advisers on this topic”.
Ben Davis, a mining analyst at Liberum, said the late twist meant a deal was still possible but that Anglo’s opposition to first spinning off its South African businesses remained a problem. “Final offers are never final and the door has been left open, but it’s difficult to see how to ‘make safe’ BHP’s proposed structure,” he said.
Anglo said the latest proposal valued its shares at £29.34 based on the closing price of its shares on April 23, before news of the merger talks became public. BHP’s previous offer valued Anglo at £27.53 per share, or £34bn. It had initially offered £25 a share, or £31bn.
The deal would hand Anglo shareholders 17.8 per cent of BHP’s shares and is a 47 per cent premium to Anglo’s share price before news of the merger talks became public, according to BHP.
BHP’s chief executive Mike Henry said the company “looks forward to engaging with the board of Anglo American to explore this unique and compelling opportunity to bring together two highly complementary, world-class businesses”.
News of BHP’s improved bid arrived hours after the Public Investment Corporation, the South African state-owned investor that is Anglo’s second-biggest shareholder, said BHP needed to make a “meaningful revision” to its offer.
Anglo said in a statement: “The board continues to believe that there are serious concerns with the structure given that it is likely to result in material completion risk and value impact that disproportionately falls on Anglo American’s shareholders.”
Anglo last week unveiled its dramatic turnaround plans to break itself up by hiving off its metallurgical coal, diamond and platinum divisions in a bid to rebuff BHP.
BHP’s proposal to demerger the two units has sparked controversy in South Africa during an election year since it has been perceived as BHP making a vote of no confidence in the country.
Anglo shares nudged lower by 0.2 per cent to close at £26.81 in afternoon trading in London.
Robert Johnson is a UK-based business writer specializing in finance and entrepreneurship. With an eye for market trends and a keen interest in the corporate world, he offers readers valuable insights into business developments.
