(Danny Froese/Getty Images)
- BHP Group approached rival Anglo American to take over.
- Anglo said BHP's offer was conditional on the company first separating out its South African platinum and iron ore operations.
- Previous potential suitors for Anglo have been turned away by Anglo's complex structure and product mix, particularly its deep exposure to South Africa.
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BHP Group, the world's largest mining company, is making a takeover bid for rival Anglo American, in a move that could spark the biggest shake-up in the industry in more than a decade.
Anglo American announced late Wednesday that it had received an unsolicited all-stock merger offer, after Bloomberg reported that BHP was considering a potential offer. Anglo added that BHP's offer is conditional on the company first separating out its South African platinum and iron ore sectors.
If successful, the deal would mark a return to big deals for BHP, which has revived its appetite for transformative acquisitions over the past few years under CEO Mike Henry. This appears to have been arranged to expand BHP's copper footprint, highlighting how the red metal has become a priority for the mining sector, and the move attracts other suitors aiming to do the same. may be wiped out.
“If BHP indeed continues to pursue this transaction, we would be surprised if no other bidder emerges,” Jefferies LLC analysts led by Christopher Lafemina said in an email. They said valuing Anglo at $42.6 billion, a 28% premium to the latest share price, could bring the deal “across the finish line”.
Anglo American has long been a top prospect among the biggest mining companies, as it owns large copper operations in South America, especially at a time when most of the industry is keen to add reserves and production. considered a target. But its complex structure, variety of products, and in particular its deep ties to South Africa, have deterred potential suitors.
BHP produced approximately 1.2 million tonnes of copper on an equity basis in 2023, compared to Anglo's production of 826,000 tonnes. That would give the combined group a roughly 10% share of global mining supply. Jeffries said antitrust issues were “likely to be an issue” for the deal because governments consider copper a critical mineral.
Anglo has faced a series of major setbacks over the past year, including falling prices for some of its key products, while operational difficulties have forced it to cut production targets, resulting in a decline in its valuation. , making the company vulnerable to potential bidders.
The company said in a statement that its board is considering the proposal and there is no certainty that it will be made.
Anglo's share price has fallen 12% in the past 12 months, giving the company a market value of 27 billion pounds ($34 billion). BHP, which trades in London and Sydney, has a market capitalization of about $149 billion.
Great deal
If successful, the deal would be the world's largest diversified mining company's first major transaction in more than a decade. BHP and its biggest rival have been on the sidelines for years after a series of disastrous deals, but are warming to the prospect of a deal after reassuring investors that they have learned from past mistakes.
“We need to see what price BHP was assuming to get a better picture,” Adrian Prendergast, senior analyst at Morgans Financial, said in an email. He said the Anglo acquisition was “significant but not transformational” for BHP, given the size of the target.
BHP last year bought copper producer OZ Minerals for about $6.4 billion in its first major acquisition in years, but has otherwise focused on selling assets such as oil, gas and coal.
The obvious attraction here is Anglo's South American copper business. The company has long been on the radar of industry giants, even though it has faced recent setbacks that forced it to lower its copper production forecasts.
Anglo's proposal could spur other companies to take action. Rio Tinto Group, the second-largest miner, is also investing in copper production, and Glencore last year made an unsuccessful takeover bid for Teck Resources, which operates the coveted copper business. An agreement was reached to sell a Canadian company's coal assets.
While Anglo's valuation may make it more attractive, it remains a very complex business. The company owns majority stakes in two South African listed mining companies, Anglo American Platinum and Kumba Iron Ore, and is also the majority owner of diamond miner De Beers. It also has a long and complicated relationship with South Africa, whose largest shareholder is the National Pension Fund Administrator.
Anglo said BHP's proposal was to first transfer stakes in Anglo's two South African businesses to small and medium-sized investors before proceeding with the acquisition. The two parts of the proposal are said to be “mutually conditional.”
Anglo's other businesses include copper, nickel, steelmaking coal, Brazilian iron ore and the iconic De Beers business.
Both companies are also investing in new fertilizer projects, with BHP building a large potash mine in Canada and Anglo developing a polyhalite mine on England's east coast.
