Anglo American CEO Duncan Wanblad will be under pressure to deliver the stand-alone value he has promised his shareholders after BHP walked away from its proposed merger late on Wednesday.
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 this 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.
BHP on Wednesday morning 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.
Restructuring
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 as the group’s only major asset in SA.
BHP CEO Mike Henry has spent the past few days in London courting investors as BHP tried to win Anglo’s support while reassuring its shareholders — many of whom have strongly supported the Australian group in its effort to acquire Anglo’s rich copper mines in South America — that it would not overpay.
Henry said late on Wednesday that his group would not be making a firm offer for Anglo. But it remained of the view that its proposal would have been the most effective structure to deliver value for Anglo shareholders. It was confident that working together, the two groups could have obtained regulatory approvals in SA.
“While we believed that our proposal for Anglo American was a compelling opportunity to effectively grow the pie of value for both sets of shareholders, we were unable to reach agreement ... on our specific views in respect of SA regulatory risk and cost,” Henry said. “Despite seeking to engage constructively and numerous requests, we were not able to access from Anglo American key information required to formulate measures to address the excess risk they perceive,” he said.
‘Resilience’
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.
The Anglo share price fell almost 4% on Wednesday to close at £24.58 on the London Stock Exchange. 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.
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