Anglo American plans a secondary London listing for its platinum business, which would help to reduce capital outflows from SA when it unbundles its 80% stake in Anglo Platinum (Amplats), as the group has promised to do as part of the far-reaching restructuring plan it announced in mid-May.
Anglo CEO Duncan Wanblad revealed this on Thursday after Australian miner BHP walked away from its bid to buy Anglo late on Wednesday. This decision came after Anglo rebuffed it for the fourth time and refused to extend the deadline for further negotiations. BHP’s proposal also required Anglo to unbundle Amplats, as well as Kumba Iron Ore, a move that analysts at JPMorgan estimated could have caused a net R80bn to flow out of SA.
Costs and risks
Wanblad moved to counter charges that Anglo had made SA look bad as an investment destination with a defence against BHP that highlighted how hard SA’s regulatory hurdles made it to get a deal done in SA.
Anglo has repeatedly said that the BHP bid, which required “two demergers and a takeover” — all of which would have needed competition clearance — would have imposed significant costs and risks on its shareholders. SA’s competition authorities generally demand a slew of often costly public interest conditions to approve large merger deals.
But in an interview with Business Day, Wanblad insisted that all the regulatory issues that Anglo raised were “absolutely specific to the structure of this particular deal”.
The public interest issues that arose were not specific to SA. “They are public interest issues that happen all over the world, but in this particular case would have landed disproportionately on the Anglo American shareholders. And that was what I had a real problem with in the context of the value ... that was going to be delivered to the Anglo American shareholders.
“This was not in any way a commentary on SA as an investment jurisdiction, which ... is great,” Wanblad said
Narrower focus
Anglo’s restructuring plan, which it has fast-tracked in response to the BHP bid, will cause it to shed four of its businesses — platinum, diamonds, manganese and nickel — to narrow its focus on just copper, iron ore and fertiliser, as it tries to improve its performance and unlock value for shareholders.
Unlike in the BHP proposal, Anglo plans to keep Kumba Iron Ore, which will end up as the only significant SA business left in its portfolio if it implements the restructuring as planned.
But as in the BHP proposal, it will “demerge” or unbundle its 80% of Amplats to Anglo shareholders who would then directly hold the platinum shares. That would lift Amplats’ weighting in the JSE index, so more SA and emerging-market investors would buy it.
But it would mean many of London-listed Anglo’s foreign shareholders, particularly those with narrow mandates, would have to sell their platinum shares, resulting in outflows of capital from SA, or “flowback”.
JPMorgan estimated in a May 23 report on the BHP bid that the platinum and Kumba unbundlings together could result in a net $4.29bn outflow from SA, with developed market investors selling $9.4bn of shares but emerging-market investors buying $5.1bn over time.
“What we would be looking to do is set up a listing on the UK stock exchange to help manage that potential flowback,” Wanblad said.
Anglo had looked at all options for Amplats, which he said was “a fantastic business ... characterised by the most astounding assets, particularly Mogalakwena, and ... a competitive advantage that is second to none”. But as a specialist business, it shouldn’t be hidden inside a portfolio, Wanblad said.
Wanblad has committed to substantially completing Anglo’s restructuring process by end-2025, a target he said was “not overly ambitious but appropriately ambitious”, based on Anglo’s experience of running major divestments as part of a portfolio restructure.
It would take longer to complete the De Beers sale or unbundling, because of the impact of the cycle on that business, Wanblad said.
De Beers is 85% owned by Anglo and 15% by the Botswana government. Botswana’s President Mokgweetsi Masisi said earlier this week that his country hoped for a quick separation of De Beers from Anglo before Anglo was exposed to a potential hostile takeover.
Amplats, the world’s second-largest producer of platinum group metals, said it might have to cut up to 3,700 jobs after its profit plummeted 71% last year as prices cratered.
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