Anglo American’s board unanimously rejected BHP’s £31.1 billion (A$59.5 billion) all-share offer, citing that the proposal is “opportunistic and fails to value Anglo American’s prospects.”
BHP’s unsolicited, non-binding, and highly conditional combination offer requires Anglo American to complete two separate demergers of its entire shareholdings in subsidaries Anglo American Platinum and Kumba Iron Ore to Anglo American shareholders.
Anglo American said the proposal would significantly dilute the value of upside participation of its shareholders relative to BHP’s shareholders. Upside participation measures how much an investment’s value increases when the market or asset it’s tied to goes up.
“The proposed structure is also highly unattractive, creating substantial uncertainty and execution risk borne almost entirely by Anglo American, its shareholders, and its other stakeholders,” said Anglo American Chairman Stuart Chambers.
“Anglo American has defined clear strategic priorities—of operational excellence, portfolio, and growth—to deliver full value potential and is entirely focused on that delivery.”
Anglo American emphasised that it is well-positioned to create significant value from its assets that are well-aligned with the energy transition, with copper representing 30 percent of the company’s total production.
BHP Confirms Proposal
The rejection decision came after a day BHP confirmed it made an offer, in a stock exchange disclosure.BHP said that Anglo American’s high quality iron ore operations in Brazil and metallurgical coal projects in Queensland, Australia, would complement the its existing portfolio.
Moreover, the proposed acquisition would increase BHP’s exposure to future facing commodities through Anglo American’s world-class copper assets.
Meanwhile, Anglo American’s other assets, such as its diamond business, would be subject to a strategic review after the completion of the acquisition.
Proposed Acquisition to Position BHP as World’s Biggest Copper Producer
Should the proposal eventually become a deal, BHP will emerge as the world’s biggest copper producer, according to Benchmark Mineral Intelligence analysts.“A lack of new mined copper resources is a major obstacle for the energy transition, and mining companies are facing growing resistance to building new mines, forcing them to merge to achieve growth,” said Yongcheng Zhao, Principal Copper Analyst at Benchmark.
“The proposed deal highlights miners’ desperation to boost production through acquisitions, rather than through organic growth, in order to reap the benefits of the growing supply gap. However, this solution does little to bridge the supply gap itself,” said Piotr Ortonowski, project manager at Benchmark.
In a speech at the IEA Critical Minerals and Clean Energy Summit last year, BHP CEO Mike Henry said that the world would need about $386 billion growth capital investment into copper in the next seven years to limit temperature rises to 1.5 degree Celcius.
“More projects need to be identified, permitted and given the green light by those who are to invest in them,” said Mr. Henry.
Last May, BHP completed the acquisition of Australian copper producer OZ Minerals for $6.4 billion.
