Anglo rejected BHP’s new offer on Wednesday on the grounds that it retains an unworkable structure.
BHP Group sweetened its bid for the second time in as many weeks for Anglo American, offering about R900bn and underlining the Australian company’s determination to bolster its copper portfolio amid growing demand for minerals used in eco-friendly energy sources.
The announcement came hours before BHP’s deadline to put up or shut up, make a firm offer or walk away, according to UK M&A rules, and amid an increasing number of top shareholders in Anglo calling for a higher offer.
The two companies gave conflicting figures, with Anglo saying the offer was worth £29.34 per share, while BHP inidicated it was £31.11. These numbers value the company at £38bn-£39bn, while the previous offer was per share, or almost £39bn pounds, is higher than the previous offer of £34bn and gives Anglo shareholders, which include the Public Investment Corporation (PIC), a slightly bigger stake in the combined entity that would be the world’s biggest copper producer. The new offer is more than 24% higher than BHP’s original offer.
“We have put forward a final ratio that marks a considerable increase from our initial proposal, reflecting our disciplined approach to M&A and our commitment to delivering long-term fundamental value,” BHP CEO Mike Henry said in a statement.
The offer on the table does not sufficiently reflect the embedded value [or] the future potential that BHP stands to inherit
— Abel Sithole, PIC CEO
Anglo, which has put up its own defences to BHP’s overtures, has rejected the new offer.
“The latest BHP proposal contained different terms, however it still retained the previous structure, which required a demerger of Anglo American’s interests in Anglo American Platinum and Kumba Iron Ore,” Anglo said in a statement.
The announcement could mark a pivotal moment in the talks between Anglo and BHP as it, for one thing, prompted the target to ask for the deadline for the put up or shut up to be pushed back by seven days to May 29 so talks could be had towards a solution that could lead to the creation of one kingpin in the global mining industry.
Embedded value
The increased nonbinding offer also underlines BHP’s resolve to win over shareholders such as the PIC, which earlier expressed concern about the valuation and the structure of the transaction. The offer implies a 47% premium over the Anglo share price on April 23, and a 67% premium on the undisturbed market value of Anglo’s unlisted assets, which include De Beers and its coveted copper business.
“The offer on the table did not sufficiently reflect the embedded value, nor the future potential that BHP stands to inherit. As stakeholders, we must ensure that the terms are equitable and in line with the long-term interests of all parties involved,” CEO Abel Sithole said in a statement on Wednesday, referring to the previous offer.
Sithole also said BHP should substantially revise its current proposal, accounting for the significant risks that shareholders of Anglo and its subsidiaries would be undertaking over a prolonged period.
The PIC insisted on the continuous and lasting involvement of SA shareholders in the acquired assets via the JSE, underscoring the importance of maintaining domestic investor participation in the wake of the proposed deal.
The PIC acknowledged Anglo’s substantial contribution to the SA economy and the broader regional development.
“The company’s role in this regard should not be diminished as a result of the proposed offer by BHP,” said the PIC, which has more than R2-trillion of assets under management.
Update: May 22 2024
This story has been updated with new information throughout.
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