Posted on 29 Apr 2024
Anglo American rejected BHP’s takeover proposal on Friday, saying the bid undervalues both the company and its future prospects, Kallanish reports.
According to Anglo chairman Stuart Chambers, the company is well positioned to create significant value from its portfolio of “high-quality assets,” aligned with the energy transition and other major trends.
“With copper representing 30% of Anglo American’s total production, and with the benefit of well-sequenced and value-accretive growth options in copper and other structurally attractive products, the board believes that Anglo American’s shareholders stand to benefit from what we expect to be significant value appreciation as the full impact of those trends materialises,” he explains.
Describing the unsolicited bid as “opportunistic” and “highly unattractive,” Chambers says the board unanimously rejected BHP’s possible offer. The proposed structure, which includes the demerger of the platinum and the Kumba iron ore businesses, would create “substantial uncertainty and execution risk borne almost entirely by Anglo American, its shareholders and its other stakeholders,” the chairman adds.
At the time of writing, BHP had not yet publicly commented on Anglo’s speedy response. The Australian miner said earlier its proposal, valuing Anglo at £31.1 billion ($39.3 billion), would bring together the strengths of the companies in an “optimal structure”.
“Anglo American would bring its assets and long-term growth potential. BHP would bring its higher-margin cash generative assets and growth projects along with its larger free cash flows and stronger balance sheet,” BHP notes. “The combination would also deliver meaningful synergies, including from sharing best practice, creating procurement, operational and marketing synergies and eliminating duplication, which would enhance profitability and value for Anglo American shareholders.”
BHP envisaged the deal to increase its exposure to “future-facing commodities”, namely copper, while complementing its iron ore and metallurgical coal portfolios with Anglo’s operations in Brazil and Australia.
“When we consider the complexity and risks to Anglo of the proposed BHP deal structure, a price higher than this would likely be required to get this deal across the finish line,” note Jefferies analysts. “We expect a bump from BHP, and other suitors could enter the mix.”
Some market players believe the BHP-Anglo bid will spur further merger and acquisition activity.
Analysts at Jefferies reiterate buy ratings on iron ore miners as consensus earnings upgrades are likely to drive share prices higher. “BHP will lag, in our view. Anglo should outperform due to copper and iron ore leverage and M&A potential,” they add, noting that the strength in the iron ore price “has caught most in the market by surprise once again”. The New York-based investment banking firm expects $90-130/t is the new-normal range for iron ore.
Source:Kallanish
