Australian mining group BHP moved on Thursday to counter perceptions that its bid for Anglo American reflected a negative view on SA, saying that its proposed bid structure “does not reflect a view of SA as a [poor] investment destination” and that SA would benefit from having Anglo Platinum (Amplats) and Kumba Iron Ore as independent listed companies.
The Melbourne-based group, which has proposed an all-share merger that would require Anglo first to unbundle its stakes in Kumba and Amplats, said it attached great importance to creating value for society and communities.
“SA will continue under BHP’s proposal to benefit from Anglo Platinum and Kumba operating as independently listed SA companies investing in local operations, communities and jobs,” BHP said in a “clarification statement” that was sent to media but not released on Sens or the UK’s RNS.
The statement came amid reports that a senior executive team led by BHP CEO Mike Henry was visiting SA and meeting with key stakeholders in the government as well as big SA shareholders such as the Public Investment Corporation.
Market sources said BHP may not initially have taken account of the political sensitivity of its approach to Anglo and the “execution risk” to the deal that could result if it faced major pushback in SA.
Mineral resources & energy minister Gwede Mantashe said last week that he would have blocked the deal if he could and that BHP — which was the product of a merger with SA-owned Billiton — had never done anything for SA.
The presidency was quick earlier this week to reject the narrative that BHP’s bid was a vote of no confidence in SA, saying it rejected the notion that the approach reflected a hostile environment for investors.
Anglo’s controlling stakes in the platinum and iron ore subsidiaries are its key SA assets, along with De Beers. BHP’s insistence that Anglo divest them as a condition of the deal has been widely interpreted as a reflection on how unattractive SA is for mining investment.
But BHP emphasised on Thursday that it had been listed in Johannesburg for multiple decades and intended to maintain its listing. The structure of its proposal reflected the priorities for BHP’s portfolio and the opportunity for synergies.
“BHP believes this structure unlocks immediate value, delivering shareholders and stakeholders access to future growth opportunities and investment currently not available under the existing ownership structure,” the Australian group said.
BHP has made it clear it is targeting Anglo’s copper assets in South America, which would make the merged group the largest copper producer with 10% of the global market at a time when demand for copper to support the “green” transition is soaring.
Rejection
More than a third of London-based Anglo’s assets are in SA, making it the only large diversified mining company with significant SA exposure. Anglo’s board last week unanimously rejected the BHP proposal as “highly unattractive”, saying it significantly undervalued Anglo and its future prospects and pointing to the uncertainty and complexity and significant execution risks that Anglo shareholders would face as a result of the proposed structure.
Since news of the bid emerged, the Anglo share price has traded up to well above the £25.08 per share which BHP’s proposal was worth at the time, prompting expectations that BHP will have to up its price. BHP must submit a formal bid by May 22.
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