Anglo American Rejects Mining Giant’s Bid
BHP announced that the potential combination of its and Anglo American’s assets would be relevant during a time when mineral market demand is at an all-time high.
Australian resources giant BHP has initiated a $60 billion bid to secure the majority of energy transition supplies as the world moves towards electrification.
Anglo American’s board has expressed that the offer significantly undervalues Anglo American and its future prospects.
Following the news of the approach, the market reacted by dropping BHP’s shares by 4.6 percent to $43.14 on Friday morning.
In Australia, Anglo American operates several major projects, including coal mines such as Dawson, Grosvenor, Capcoal, Moranbah North, Moranbah South, and Foxleigh, as well as substantial mineral assets in South Africa.
BHP, headquartered in Melbourne, is a multinational mining, metals, and petroleum company and one of the largest mining companies globally. They focus on exploration, production, and processing of minerals, oil, and gas, particularly in iron ore, copper, coal, and petroleum.
Their expansion efforts include the 2023 acquisition of OZ Minerals for $9.6 billion. His recent offer aims to boost shareholders’ exposure to future commodities by combining their copper market interests with Anglo American’s.
If approved, the deal would collectively account for 10 percent of the world’s copper market, positioning them as the largest global supplier. Anglo American would also gain more exposure to nickel assets and steel.
Shortage of Copper
Copper is a highly sought-after resource as the world shifts towards renewable energy solutions, with BHP’s CEO warning about an insufficient copper supply for full electrification of the global economy.
The unique properties of copper make it ideal for various uses in electrical wiring, electric vehicle motors, and transformers.
Yongcheng Zhao, a principal copper analyst at Benchmark, noted that a lack of new copper resources presents a challenge for the energy transition, leading mining companies to consider mergers for growth.
As wind farms depend on steel-made turbines, BHP’s proposal incorporates their iron ore and coal assets with Anglo American’s operations in Brazil and Queensland.
Why Was the Offer Rejected?
The main obstacle to the merger plan is Anglo American’s required divestment of its platinum and iron ore interests in South Africa and completion of two separate demergers, concerning all shareholdings in Anglo American Platinum Limited and Kumba Iron Ore Limited.
Anglo American’s Directors deemed BHP’s approach as unsolicited, non-binding, and highly conditional, ultimately rejecting it due to being unattractive and complex for shareholders, with significant execution risks.
Stuart Chambers, Chairman of Anglo American, criticized the proposal, stating that it undervalued Anglo American’s prospects and diluted the value upside for shareholders compared to BHP’s shareholders.
Despite the rejection, analysts predict that Anglo American might consider an improved offer from BHP, considering competition from rivals like Rio Tinto for the acquisition.
BHP is reportedly in discussions with their board and stakeholders regarding a potential improved offer, but they declined to comment when approached by the media.