BHP Was Rejected Again by Anglo American, Citing New Offer ‘Highly Unattractive’

BHP Was Rejected Again by Anglo American
Published on: May 13, 2024

Although BHP Group (NYSE: BHP) has raised the acquisition offer and terms of Anglo American Plc (LON: AAL), such as a 10% increase in price to £34 billion ($42.7 billion), and the ownership of Anglo American shareholders in the merged company has also increased from the original 14.8% to 16.6%, this new acquisition proposal has still been rejected by Anglo American, citing that these acquisition conditions are highly unattractive to the company’s shareholders.

In April of this year, Anglo American rejected for the first time the $39 billion all-share acquisition proposal put forward by BHP, stating that the offer was opportunistic and significantly undervalued the company’s prospects.

However, the condition requiring Anglo American to first split its platinum and iron ore business in South Africa before the acquisition has not changed, indicating that BHP is truly eyeing the copper assets of the mining company. In addition, this acquisition proposal could trigger a series of similar mining company acquisitions, as many competitors of BHP and Anglo American are also seeking to enhance their market positions and find their own copper mining opportunities.

BHP anticipates that with the growing demand for electric vehicles, solar panels, and high-voltage cables, the supply of copper will struggle to meet demand, hence the company views copper mining as a strategic core focus and hopes to increase its copper production by acquiring Anglo American. BHP’s copper production in 2023 was approximately 1.2 million tons, while Anglo American Group produced 826,000 tons. If the merger is successful, it will create the world’s largest copper miner, with the merged company contributing approximately 10% of global copper production.

Meanwhile, the mining company will strengthen its influence in key copper-producing countries such as Chile and Peru through the acquisition, while also acquiring a stake in the world’s four largest copper mines: Collahuasi (44% ownership), Los Bronces (50.1%), El Soldado (50.1%), and Quellaveco (60%), increasing the copper exposure by around 40%.

Mike Henry, CEO of BHP, expressed disappointment that their second acquisition proposal was rejected and continues to believe that the merger of the two companies will create significant value for all shareholders. Next, BHP must submit a new legally binding acquisition offer until May 22nd.

Ben Davis, analyst at Liberum, stated that BHP wants to acquire the assets it desires without assuming the execution risk, thus expecting shareholders of Anglo American to be sufficiently disappointed with the management to pressure them into accepting the acquisition terms. At the same time, Anglo American’ shareholders are urging the company to accelerate the release of their turnaround plan, outlining how to create more value for investors instead of simply selling off.

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