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BHP's Bold Endeavor: A Timely Bid for Anglo American's Acclaimed Resources

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Lauren Miller

May 18, 2024 - 11:34 am

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Mining Giants Clash: BHP's Race Against Time for Anglo American Takeover

Anglo American Platinum Ltd.’s Waterval smelter outside Rustenburg, South Africa

In the high-stakes world of mining, a major showdown is unfolding as BHP Group, the world’s largest miner, nears the end of its $43 billion chase for Anglo American Plc. With the deadline fast approaching, the burning question on everyone’s mind is: What would compel Anglo American to come to the negotiation table in these closing moments?

The proposed acquisition has caught the attention of the entire mining sector, as two behemoths are embroiled in a high-profile standoff. BHP's bid for a partial breakup followed by a full takeover has been met with resistance; Anglo American has firmly rejected two preliminary offers. These rejections cite under-valued offer and convoluted deal terms and have prompted Anglo to release an unexpected restructuring proposal of its own.

As the hands of the clock continue to sweep towards 5pm London time on Wednesday, BHP finds themselves boxed in by strict takeover regulations in the UK. These rules leave them with two distinct paths: either declare an intention to submit a definite offer for Anglo American or step aside for a six-month hiatus.

Sources close to the proceedings report that BHP is contemplating a sweeter deal yet has not put forth an enhanced proposal. The mining giant's strategy hinges on a modicum of accommodative gesture from Anglo American to launch a solid bid, potentially consisting of terms that would entice Anglo’s investors to propel their company into discussion.

Despite this outlook, BHP remains cautious, reluctant to enter a bidding war without negotiation and acknowledging that walking away might still be a viable option. They have clearly indicated a disinclination to pursue a hostile bid without engagement from the board of Anglo American.

As this strategic game of chess continues, representatives for both BHP and Anglo American have maintained their silence on the matter.

BHP's Chief Executive Officer, Mike Henry, has shown particular interest in Anglo's prized copper assets. These assets are considered illustrious within the industry, and BHP believes that a takeover, which would require Anglo to divest its South African platinum and iron ore businesses, could make them the preeminent copper producer globally. This would place them in command of approximately 10% of worldwide supply, an influential position as the industry braces for a predicted shortfall in supply.

The tension has only escalated following a week fraught with high drama: BHP disclosed a second refusal after it put more stock options on the table. In a prompt reciprocation, Duncan Wanblad, CEO of Anglo American, drew back the curtains on a plan to revolutionize its enterprise by stepping back from platinum, diamonds, coal industries, and decelerating a contentious fertilizer project.

The alignment of Anglo's new initiative with BHP's past suggestions—particularly the demerger of the platinum division—has given BHP increased confidence. Now, the company is assessing means to galvanize Anglo American's shareholders into applying pressure for commencement of negotiations.

Although technically feasible, a request from Anglo to extend the deadline appears unlikely at this junction, as per individuals knowledgeable of the company's plans.

The investment community has had mixed reactions. BlackRock Inc. and South Africa’s Public Investment Corp., Anglo’s two largest stakeholders, holding a significant 18% of the company's stock collectively, have remained neutral publicly. Meanwhile, activist hedge fund Elliott Investment Management has made its entry by acquiring a stake in Anglo and is presently contemplating its strategic position.

Private discussions with several major shareholders have revealed that BHP’s latest proposition has yet to hit the mark. Some investors have stated that Anglo's intention to streamline processes and focus on its copper ventures may well increase its appeal as a prospective acquisition target. This leaves the possibility of a future bid by BHP or another suitor even if the current proceedings reach an impasse.

Investors in BHP, however, may be wary if a more slimmed-down Anglo demands a heftier premium. Hugh Dive, Chief Investment Officer at Atlas Funds Management, which holds BHP shares, expressed concern over the possible hike in valuation price if Anglo managed to reduce its risk profile and enhance its operations.

Acknowledgment that BHP values Anglo—including its significant South African listings—at £29.45 per share must be made. Although the recent market closing identified Anglo shares at a lower £26.775 in London, this still reflects a substantial 27% spike since Bloomberg first reported BHP’s overtures.

Anglo's investors have extended a tentative welcome to the new business remodeling plan by the company, appreciating the promise of austerity measures, especially at the UK fertilizer project. If the management can execute this intricate portfolio transformation, the consensus among shareholders is that the resulting streamlined entity, primarily focused on copper and iron ore, could become an exceedingly tempting prospect for major industry players like Rio Tinto Group and Glencore Plc.

However, for the time being, neither BHP's nor Wanblad's vision for Anglo American prevails as the clear winner. Shareholders indicate that both perspectives carry persuasive elements, and they remain open to further arguments.

At present, BHP stands firm on not extending its offer to Anglo’s shareholders directly in a hostile manner. Such an approach would bar them from the due diligence necessary for Anglo’s insights and potentially antagonize BHP's own investors, who have called for corporate discipline. It would also necessitate a bid for all of Anglo American, contradicting BHP's stance of Anglo needing to divest certain units first.

The resolution to this complex situation lies in BHP's ability to secure a favorable response from Anglo, initiating a dialogue that could redefine the global mining landscape. With the ticking of the clock, the industry watches with bated breath as the next chapter in this corporate saga unfolds.

For more detailed reporting on this subject, readers are encouraged to follow the original story and its developments on Bloomberg's website at: Anglo-BHP Battle Is Between Two CEOs Fighting Over Same Vision.

With time running short and decisions looming that could shape the future of the mining industry, the eyes of the world remain locked on this strategic standoff. Whether BHP will make a final persuasive maneuver or retreat to strategize for another day is a revelation the market awaits with keen interest.

This remarkable confrontation illustrates the dynamic and competitive nature of the global mining sector. As these giants navigate through complex corporate strategies, the potential impact on supply chains, commodity markets, and shareholder value is significant. The outcome of this race against time is sure to resonate throughout the industry for years to come.

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