Equities

BHP's 3rd Bid for Anglo Looms, Focus on Copper & Iron

BHP prepares third bid for Anglo American, facing strategic and regulatory hurdles as deadline approaches.

By Mackenzie Crow

5/16, 10:32 EDT
American Airlines Group, Inc.
BHP Group Limited
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Key Takeaway

  • BHP prepares a third bid for Anglo American, indicating potential 5% increase amidst Anglo's strategic pivot to focus on copper and iron ore.
  • Anglo's rapid restructuring and divestment from De Beers aim to fend off BHP's takeover attempts, focusing on high-value sectors.
  • Regulatory challenges and shareholder skepticism underscore the complexity of the deal as the May 22 deadline approaches.

Takeover Tensions Rise

BHP Group Ltd., the world's largest miner, is reportedly preparing a third bid for Anglo American Plc, following Anglo's rejection of previous all-share offers. These offers required Anglo to divest its listed South African businesses, a move Anglo has resisted, citing "significant uncertainty" for shareholders. Despite Anglo's strategic counterproposal to exit diamonds, platinum, and coal to focus on copper and iron ore, its shares remain below BHP's latest bid price, indicating market skepticism.

Daniel Sullivan of Janus Henderson, holding stocks in both companies, anticipates a sweetened offer from BHP, suggesting a potential 5% increase in the bid. BHP's CEO, Mike Henry, has been vocal about the benefits of the deal, urging shareholders to weigh in on the proposed merger's prospects. Meanwhile, Anglo's rapid restructuring announcement, aiming to focus on high-value sectors like copper, has been described as both radical and potentially unsettling for its shareholders.

Strategic Shifts and Shareholder Stakes

Anglo American's swift move to divest from De Beers and other assets marks a significant pivot in its strategy, driven by BHP's persistent takeover attempts. CEO Duncan Wanblad has outlined a vision for Anglo, focusing on copper, iron ore, and crop nutrients, sectors expected to appreciate in value significantly by 2025. This strategic refocus is seen as a defense against BHP's advances, aiming to unlock shareholder value through a concentration on world-class assets.

Morningstar analyst Jon Mills emphasized the importance of BHP convincing Anglo's institutional shareholders of the merits of a higher offer, suggesting that shareholder pressure could be pivotal in the negotiation process. The looming May 22 deadline under UK regulations adds urgency to BHP's decision-making, with options including enhancing the share ratio or introducing cash into the offer.

Regulatory and Market Hurdles

The potential for a hostile bid by BHP looms, though concerns about regulatory challenges and the necessity of Anglo's management cooperation may deter such a move. BHP's insistence on the demerger of Anglo's South African businesses adds another layer of complexity to the negotiations. South Africa's mineral minister, Gwede Mantashe, has expressed reservations about BHP's offer, reflecting the broader regulatory and political landscape's impact on the deal's feasibility.

Anglo American's share price dynamics and BHP's market performance further illustrate the financial market's reaction to the ongoing takeover saga. With Anglo's shares trading below the implied bid price and BHP's year-to-date decline, the market's skepticism and the strategic calculations of both companies are in sharp focus.

Street Views

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

    "I reckon they’ll go back to Anglo and say – look, we’re going to come back with 5% more."

  • Jon Mills, Morningstar (Neutral on BHP's bid for Anglo American):

    "At this stage, I think it is up to BHP to try to convince enough of Anglo’s institutional shareholders over the coming week that it’s worthwhile pressuring their board to engage with BHP, with a potentially even higher offer on the table should this occur."