Anglo Rejects BHP Again as Pressure Builds on Its Own Strategy

Anglo Rejects BHP Again as Pressure Builds on Its Own Strategy
A dumper truck carries excavated iron ore the an open cast mine in Sishen, South Africa. Photographer: Waldo Swiegers/Bloomberg

Anglo American Plc rejected a second approach from BHP Group that valued the miner at $43 billion, as pressure builds on the 107-year old company to lay out a compelling vision to survive on its own.

Anglo shareholders were already demanding the company accelerate a turnaround plan that it’s been working on since the middle of last year. Rejecting BHP’s latest overture will add more pressure on Anglo to explain how it would create more value than by just selling to the rival. It now plans on doing that on Tuesday.

While BHP has raised its all-share offer, crucially it has maintained a structure that Anglo has already branded as unworkable, making it hard for the company to agree to talks under those terms. BHP will have to return with an improved offer, and possibly a new structure, if it wants to get a deal done.

“BHP obviously want the prize, but are not willing to take on the execution risk,” said Ben Davis, an analyst a Liberum. “They’re hoping that Anglo shareholders are frustrated enough with management that they pressure them to go for this.”

BHP, the world’s largest miner, is seeking to buy Anglo for its South American copper assets. That would make it the No. 1 copper producer, alongside its sprawling portfolio of iron ore and coal. BHP’s initial approach was rejected by Anglo.

BHP sweetened its proposal by almost 15%: offering 0.8132 of its shares for each one of Anglo’s, up from 0.7097 shares in its initial approach. But while it tweaked the terms for a demerger, it still said that Anglo must spin off its two listed South African businesses.

BHP Mega Bid and $10,000 Copper Expose Mining's Biggest Problem
Signage for the Anglo American Platinum Ltd. plant, outside Rustenburg, South Africa. Photographer: Waldo Swiegers/Bloomberg

Anglo said Monday that it’s confident in its own plans for the business and will update investors on Tuesday, after accelerating a review.

The company also reiterated its rejection of BHP’s proposed deal structure, saying it leaves its holders with a disproportionate level of risk. It also still undervalues the company, Anglo said.

The improved proposal was tabled on May 7.

The pressure is now on Anglo to show shareholders how it can deliver more value on its own. Those investors include Elliott Investment Management, the activist hedge fund that’s built a roughly $1 billion stake in Anglo. So far, it’s not made its view public.

Read More: Anglo Investors Tell Company to Move Faster to Survive BHP Bid

Anglo American 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. However, suitors have been put off by its complicated structure and mix of other commodities from platinum to diamonds, and especially its deep exposure to South Africa.

Anglo has faced a series of major setbacks over the past year as prices for some of its key products plunged, while operational difficulties have forced the company to slash its production targets — driving down its valuation and leaving the company vulnerable to potential bidders.

Investors have since pushed for details of a business review that Chief Executive Officer Duncan Wanblad has been running since mid-2023, looking at every mine in its portfolio. Central to investor concerns are the future of diamond miner De Beers, the Woodsmith fertilizer mine that Anglo is building in the UK and its South African businesses.

Read More: What’s Anglo Worth? For Now It’s Less than the Sum of Its Parts

If successful, a takeover would mark a return to large-scale dealmaking for BHP, which has revived its appetite for transformational acquisitions in the past couple of years under CEO Mike Henry.

Top executives of both companies are at a conference in Miami this week.

Anglo's Copper Business Is the Jewel in the Crown | Analysts say the unit's standalone value exceeded Anglo's before BHP arrived

BHP, which has a market value of about $145 billion, has made copper a central part of its strategy, betting that supply will struggle to keep pace with demand for metal to build electric vehicles, solar panels and high-voltage cables. But the company’s expansion options at its own assets are not enough to offset its retreat from fossil fuels, creating pressure to add new mines from outside.

A successful takeover would give BHP about 10% of global copper output. The offer is also sparking predictions that it will set off a wider wave of mining M&A, with many of BHP and Anglo’s rivals scouting for their own copper deals.

Anglo shares fell 0.6% as 3:31 p.m. in London, while BHP’s London traded shares slipped 0.4%.


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