BHP Eyes 5% Higher Bid for Anglo Amid Copper Demand Surge

BHP eyes third bid for Anglo American, focusing on copper and iron ore amidst shareholder skepticism and strategic divestments.

By Bill Bullington

5/15, 05:52 EDT
American Airlines Group, Inc.
BHP Group Limited

Key Takeaway

  • BHP Group Ltd. is expected to increase its bid for Anglo American Plc by 5% after previous offers were rejected, with the latest at £27.53 per share.
  • Anglo American's strategic shift to focus on copper and iron ore amidst divestment from diamonds, platinum, and coal raises execution risks.
  • The acquisition battle underscores the global demand for copper, crucial for renewable energy technologies, positioning BHP to expand its market presence.

Takeover Tensions Rise

BHP Group Ltd., the world's largest miner, is anticipated to present a third and improved proposal to acquire Anglo American Plc, despite Anglo's rejection of previous all-share approaches. Anglo American, aiming to refocus its business, announced plans to exit diamonds, platinum, and coal, concentrating instead on copper and iron ore. BHP's latest bid valued Anglo at £27.53 per share, yet Anglo's shares traded around £26.40, indicating market skepticism towards the bid's success.

Daniel Sullivan from Janus Henderson, holding stocks in both companies, speculated that BHP might increase its offer by 5%, suggesting that such a move could quickly gain shareholder approval. BHP CEO Mike Henry emphasized the importance of shareholders deciding which company's restructuring plan offers greater value, highlighting BHP's disciplined pursuit of Anglo.

Strategic Shifts and Shareholder Skepticism

Anglo American's bold restructuring plan to divest from diamonds, platinum, and coal has been met with mixed reactions. The company's strategy aims to focus on copper and iron ore, sectors where it sees significant growth potential. However, this move, coupled with the rejection of BHP's bids, has raised concerns about the complexity and execution risks involved.

BHP's CEO Mike Henry pointed out that Anglo's plan to spin off its Anglo American Platinum Ltd. unit suggests that divesting South African assets, a condition of BHP's bid, is feasible. This statement underscores the ongoing debate over the best path forward for Anglo American and its shareholders.

Copper at the Core

The battle for Anglo American is largely driven by the global demand for copper, essential for renewable energy technologies. BHP's interest in Anglo stems from its desire to enhance its presence in the copper market, particularly in Chile and Peru. By acquiring Anglo, BHP would control a significant portion of global copper production, positioning itself advantageously in the renewable energy sector.

Anglo's rejection of BHP's revised $42.7 billion bid reflects its commitment to shareholder interests amidst the complex dynamics of divesting key assets. The situation is further complicated by interest from other global miners, including Rio Tinto, which has existing operations in South Africa and the diamond market, potentially making it a strong contender for Anglo's assets.

Street Views

  • Daniel Sullivan, Janus Henderson (Bullish on BHP and Anglo):

    "I reckon they’ll go back to Anglo and say - look, we’re going to come back with 5% more. That’ll be it, and we’re going to take it straight to the shareholders. And the shareholders will rush at it faster than you’ve ever seen."

Management Quotes

  • Mike Henry, CEO of BHP:

    "Shareholders should now determine which of the two teams had a better chance of delivering the overhaul."