Business Maverick

STRUCTURE SHAKEUP

Anglo to ditch Amplats, De Beers, and steelmaking coal as it fends off BHP’s advances

Anglo to ditch Amplats, De Beers, and steelmaking coal as it fends off BHP’s advances
Anglo American CEO Duncan Wanblad speaks during the Investing in African Mining Indaba 2023 conference in Cape Town, South Africa. 6 February 2023. (Photo: Reuters/Shelley Christians/File Photo)

Anglo American said on Tuesday that it was hiving off the businesses and assets as it fends off the unwanted advances of BHP. Anglo hopes investors will accept this plan rather than BHP’s proposal, but a leaner meaner Anglo could remain a take-over target. 

Now that Anglo American has rebuffed two-takeover approaches from Melbourne-based BHP, the 107-year old-mining company has announced a “radical” shakeup of its structure that involves selling or demerging its De Beers diamond business, Anglo American Platinum operations, and its steelmaking coal assets.

Anglo American said the planned demergers stemmed from the completion of its asset review in 2023. However, some market watchers might interpret it as Anglo’s hand being forced by BHP’s recent takeover bid for the company.

Anglo American CEO Duncan Wanblad insisted that the review of the company’s assets was always planned and preceded BHP tabling its £34-billion (R785-billion) takeover bid of the company. “This review was not prompted by BHP,” Wanblad said in a call with journalists on Tuesday 14 May, adding that Anglo constantly reviews its assets to unlock value for shareholders.

Wanblad also defended the company’s decision to reject BHP’s advances, saying that its offer still undervalues the company’s assets and will further heighten the undervalue once the restructuring and review of the company’s assets is completed by 2025.  “What I am clear on is that the offer of BHP significantly undervalues the company. And the company that Anglo wants to build is even significantly undervalued by BHP,” said Wanblad.

BHP’s first all-share merger offer was rejected by Anglo’s board in April. Then BHP increased its offer by 15% in the merger-exchange ratio, increasing Anglo shareholder’s share in the emerging entity from 14.8% to 16.6%. This was also rejected by Anglo on Monday 13 May.

Since BHP tabled its offer, the potential deal has raised concern (and ire) from some corners, with politicians worrying that it would signal the complete exit of Anglo from South Africa. Investors and lawyers also raised concerns about the complexity of the deal and the lengthy time it would take for it to be approved by competition authorities.

Wanblad has nailed his colours to the mast, saying that the rejection of BHP’s bid and the review of Anglo’s assets signals the company’s commitment to South Africa.

Read more in Daily Maverick: BHP makes revised pitch to Anglo and gets rebuffed again

“The most important thing is to realise that Anglo won’t be gone from South Africa. We are creating something strong for South Africa, creating two reliant companies [De Beers and American Platinum] that have the capability to grow more than in the portfolio of Anglo American,” said Wanblad.

He also said Anglo American is not new to restructuring its operations — the last being in 2016 when it planned to pull out of some coal and iron ore assets under former CEO Mark Cutifani — and expects that the company “will be able to work through the issues with the South African government” around selling or demerging its De Beers diamond business, Anglo American Platinum (Amplats) operations, and its coking coal assets.

Anglo said the planned divestments and demergers would give it a “… radically simplified portfolio of world-class assets in copper, premium iron ore and crop nutrients”.

“We expect that a radically simpler business will deliver sustainable incremental value creation through a step change in operational performance and cost reduction,” he said.

The steelmaking coal assets will be divested and Anglo said there was “currently strong buyer interest”.  Amplats is to be demerged — probably along the lines of how Anglo spun off its South African coal assets into Thungela — while De Beers will either be divested or demerged. Anglo plans to keep Kumba Iron Ore as part of a “premium” iron ore division that would also include its Minas Rio mine in Brazil.

In the coming days, Wanblad plans to embark on a roadshow to present the restructuring plan to Anglo shareholders and drum up support for it.

Wanblad also took the opportunity to trash the timing of BHP’s takeover bid of Anglo, inferring that it was disrespectful considering that South Africa faces a general election in two weeks’ time. He described BHP’s announcement of the potential takeover as “disrespectful to the South African government” considering the upcoming election.

“I would have done it in a different time frame. I would have engaged the South African stakeholders in a different way. I would have been more respectful of the situation in South Africa,” he said.

Asked if he would be open to a tie-up with BHP or another mining giant after the completion of Anglo’s asset review programme by 2025, Wanblad said: “If someone wants to buy it at that particular time, they will have to pay the best price for it.” DM

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  • Lucifer's Consiglieri says:

    Very telling that international financial analysts speak of Anglo’s South African assets playing the role of a “poison pill”, defending it against takeover bids. Says all that you need to know about South African political risk.

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