BHP’s Revised Proposal for Anglo American Rejected Amid Disagreements Over Value and Structure

In the latest developments of the ongoing saga between mining giants BHP and Anglo American, BHP’s revised proposal to acquire Anglo has been met with rejection.

In the latest developments of the ongoing saga between mining giants BHP and Anglo American, BHP’s revised proposal to acquire Anglo has been met with rejection. The proposed deal, valued at approximately £34 billion, was dismissed by Anglo’s board, citing concerns over both its perceived value and the structural intricacies involved. Despite BHP’s efforts to sweeten the deal, tensions remain high as both parties stand firm on their positions.

BHP’s Revised Proposal Details:

BHP’s revised proposal, unveiled recently, mirrored its earlier proposal structure, featuring an all-share offer with mandatory demergers of Anglo’s South African units—Anglo American Platinum (Amplats) and Kumba Iron Ore. Under the terms, Anglo shareholders would receive 0.8132 BHP shares for each of their ordinary shares, alongside shares in Amplats and Kumba. The revised proposal, valued at £27.53 per Anglo American ordinary share, marks a 15% increase in the merger exchange ratio from the initial offer.

Anglo’s Response:

Despite the improved terms, Anglo’s rejection stems from what it perceives as an undervaluation of its assets and an unattractive deal structure. Stuart Chambers, Anglo’s chairperson, emphasized the failure of BHP’s proposal to recognize the inherent value within Anglo. Additionally, concerns were raised regarding the proposed inter-conditional execution of two demergers and a takeover, which Anglo deems to disproportionately expose its shareholders and stakeholders to uncertainty and execution risks.

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Disagreements Over Value:

Market sentiment, as indicated by analysts and traders surveyed by Bloomberg, had converged around an average price of £30.43 per share for a potential deal, significantly higher than BHP’s revised offer. Despite efforts to bridge the gap between valuation expectations, Anglo remains steadfast in its stance, asserting that BHP’s proposal falls short of reflecting the true value of its assets.

BHP’s Perspective:

CEO Mike Henry expressed disappointment at Anglo’s rejection, highlighting the strategic alignment between the two companies and the potential synergies to be unlocked through a merger. BHP sees the combined entity as a powerhouse in the mining industry, boasting a diversified portfolio of high-quality assets and operational excellence. Despite the setback, BHP remains committed to its capital allocation framework and its vision for the fundamental value of both BHP and Anglo American.

The Impasse:

With both parties at an impasse, the future of any potential merger remains uncertain. While BHP continues to advocate for the strategic benefits of the proposed combination, Anglo insists on a fair recognition of its value and concerns over deal structure. The rejection underscores the complexities involved in mega-mergers within the mining sector and the delicate balance between value creation and risk mitigation.

As BHP’s revised proposal for Anglo American faces rejection, the standoff between the two mining giants persists. Despite efforts to address concerns over value and structure, fundamental disagreements remain unresolved. The outcome of this standoff will not only shape the future of these two industry titans but also reverberate across the global mining landscape. As stakeholders await further developments, uncertainty looms over the possibility of a successful merger between BHP and Anglo American.

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