Shares in Anglo American fell as much as 5% in early trade on Thursday on the JSE after BHP announced late on Wednesday that it was walking away from its proposed merger.
In early Thursday trade, Anglo’s shares were down as much as 5% at R568.75, while those of BHP were up 0.4% at R548.40.
In London on Wednesday, Anglo’s share price fell almost 4% to close at £24.58. It was trading at £21 on April 23, just before news of BHP’s bid hit the media. BHP valued its improved third proposal last week at £31 on the day. The JSE was closed on Wednesday as SA voters went to the polls to vote in national elections.
Business Day reported that BHP’s decision to kill the deal came just minutes before the deadline for it to submit a formal bid for Anglo. It followed a day of drama in which the Australian miner pushed hard to get Anglo back to the table by offering a suite of socioeconomic measures aimed at getting the merger past SA regulators.
But that failed to persuade Anglo’s board to extend the deadline, given that BHP declined to make any changes to the complex structure of the deal.
The structure, which required that Anglo unbundle its stakes in Anglo American Platinum (Amplats) and Kumba Iron Ore as a condition of the BHP takeover, ended up being the main sticking point after BHP twice upped the value of the all-share offer it first proposed to Anglo’s board in mid-April.
Anglo had repeatedly expressed concern that the deal would require multiple, difficult regulatory approvals and conditions, the risk and cost of which would fall disproportionately on its shareholders.
On Wednesday morning, BHP made a three-year commitment to maintain jobs, employee share ownership, local procurement and social investment in SA, as well as to set up a mining centre of excellence, as it tried and ultimately failed to allay Anglo’s concerns.
London takeover rules now bar BHP from making a bid for Anglo for at least six months — unless a rival bidder comes along or Anglo changes its mind.
Anglo, meanwhile, will press ahead with the extensive restructuring and cost-cutting plan that it first promised in February, but has now set out in detail. The plan, which will narrow Anglo’s focus to just copper, iron ore and fertiliser, could ultimately cause Kumba to remain the group’s only major asset in SA.
Anglo chair Stuart Chambers thanked Anglo shareholders and stakeholders for their constructive dialogue and the group’s employees for their “resilience and commitment”.
“We look forward to delivering our plans for the benefit of our shareholders and for stakeholders, both in our host countries and more broadly,” Chambers said.
BHP is believed to have been working on an Anglo deal for the past four years. It became clear from the start of the BHP saga that Anglo would not survive in its current form, whatever the outcome. Anglo’s own restructuring plan, which follows a plunge in profit in the latest year as global platinum and diamond prices collapsed, also envisages the unbundling of Amplats, as well as the unbundling or sale of its diamond business, De Beers.
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