Anglo Rejects $39B BHP Bid, Copper at Heart of Mining Spat

Key Takeaway

• Anglo American rejects BHP's $39 billion bid, citing undervaluation and high execution risks, emphasizing strategic copper assets.
• The failed merger highlights industry focus on securing copper for energy transition, with Anglo owning interests in major mines.
• Market analysts and major shareholders express skepticism about the merger's benefits, underscoring concerns over valuation and consolidation.

Takeover Proposal Rejected

Anglo American Plc has decisively rejected a $39 billion takeover bid from BHP Group, citing the offer as significantly undervaluing the company and fraught with high execution risks. The bid, which was made public on Thursday, April 25, 2024, suggested an all-share transaction that necessitated Anglo American to divest its stakes in Anglo American Platinum (Amplats) and Kumba Iron Ore (Kumba) prior to the acquisition. Anglo's board, led by Chairman Stuart Chambers, criticized the bid for being opportunistic, failing to accurately reflect Anglo American's value and future prospects. Chambers highlighted concerns over the deal's structure, pointing to "substantial uncertainty and execution risk" for stakeholders involved.

Strategic Metals and Market Positioning

The rejection of BHP's proposal underscores the strategic importance of Anglo American's assets, particularly its significant copper holdings. Copper is essential for the global energy transition, and Anglo American boasts ownership interests in four of the world's largest copper mines, including Collahuasi, Los Bronces, El Soldado, and Quellaveco. This metal's critical role in energy transition trends positions Anglo American favorably for future value creation. The proposed merger would have granted BHP approximately 10% of the global copper supply, highlighting the strategic maneuvers within the industry to address anticipated copper shortages and capitalize on rising prices.

Industry Perspectives and Shareholder Concerns

The bid's rejection has elicited reactions from various market analysts and shareholders, emphasizing the complexities of executing such large-scale mergers in the mining sector. Richard Hatch from Berenberg expressed skepticism regarding the operational synergies between Anglo American and BHP, suggesting limited turnaround opportunities. Furthermore, Legal & General Investment Management, one of Anglo's largest shareholders, labeled BHP's approach as "highly opportunistic" and "unattractive," arguing that the proposed exchange ratio undervalued Anglo American. These perspectives highlight the broader industry and shareholder apprehensions regarding further consolidation and the need for accelerated investment.

Management Quotes

• Dale Andres, CEO:

  "These findings will enhance the next resource estimate due in the third quarter of 2024."