Top Anglo shareholder backs group’s break-up plan

LEGAL & General Investment Management, one of Anglo American’s largest…

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LEGAL & General Investment Management, one of Anglo American’s largest shareholders, has come out in support of the group’s break-up plan, according to a report by the Financial Times on Monday.

Anglo announced plans on May 14 to create a focused copper and iron ore company by unbundling or selling its shares in Anglo American Platinum, De Beers and its metallurgical coal mines in Australia. The plan comes amid a takeover proposal from BHP.

The Australian firm has proposed an all-share transaction which first requires Anglo to spin off its platinum and iron ore assets in South Africa. Anglo CEO Duncan Wanblad criticised the plan for undervaluing the company and for being too complicated.

Nick Stansburg, head of climate solutions at LGIM was quoted by the FT today as saying: “The plan outlined by Anglo American is a radical but attractive strategy to create value for long-term investors”.

LGIM owns slightly less than 2% of Anglo’s stock, the newspaper said.

“We agree the execution of this plan will be challenging for management to deliver on, but we are confident in their ability to do so over time,” Stansbury said. LGIM also has a 1% stake in BHP.

The proposal from BHP was “far from reflecting fair value for the business,” said Stansbury. He added that: “For a takeover offer to be attractive an offer would need to be at a reasonable premium to fair value”.

At the time of its second all-share proposal on May 7, BHP valued Anglo at about £27 per share, £2 more than its first proposal. Analysts have said that a proposal in the region of £30 to £31 could bring Anglo to the table, but it would also represent full value – a position that BHP shareholders might be unwilling to stomach.

Reports over the weekend said BHP may well improve its proposal this week in terms of the LSE’s ‘put up or shut up’ regulation which falls due May 22. If the Australian firm doesn’t make a firm offer by then, it will be restricted from visting the transaction for another six months.

“We expect BHP to make another offer before May 22nd 5pm ‘put up shut up’ deadline. Of course, now that Anglo has its own radical plan, any BHP offer will be more challenged than before,” said Liberum Capital’s Ben Davis in a note on May 17.

He suggested “a big premium” of 35% over BHP’s last £27/share proposal and a “radical change in structure” potentially involving a joint BHP/Glencore offer. That would be one way of successfully achieving a takeover, he said. A third option would be “more time”.

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