BHP scraps Anglo attempt
BHP Group has concluded its five-week attempt to acquire Anglo American for nearly AU$75 billion.
The pursuit ended after last-minute discussions over restructuring the 107-year-old mining company failed.
Anglo American rebuffed BHP's eleventh-hour request to extend takeover talks for a second time following three unsuccessful takeover bids from the Melbourne-based miner.
This left BHP with the choice to either present a formal offer directly to Anglo’s shareholders by 5pm on Wednesday or abandon its pursuit for at least six months.
In a statement released shortly before the deadline, BHP's Chief Executive Mike Henry said “BHP will not be making a firm offer for Anglo American”.
The proposed deal, anticipated to significantly alter the global mining industry, reached a deadlock over BHP’s intention to divest some of Anglo’s South African business interests.
These plans were characterised as “highly complex and unattractive” by Anglo, which has significant operations in South Africa and is partly owned by the South African government.
“While we believed that our proposal for Anglo American was a compelling opportunity to effectively grow the pie of value for both sets of shareholders, we were unable to reach agreement with Anglo American on our specific views in respect of South African regulatory risk and cost ... despite seeking to engage constructively and numerous requests, we were not able to access from Anglo American key information required to formulate measures to address the excess risk they perceive,” Henry said.
The takeover discussions coincided with the run-up to South Africa’s general election, which has been described as the most uncertain since the end of apartheid, and concluded as South Africans headed to the polls.
BHP's three takeover bids included a condition for Anglo to spin off its South African operations, which encompass Kumba Iron Ore and Anglo American Platinum, major employers in South Africa.
This requirement faced opposition from Anglo and criticism from the South African government, Anglo’s largest shareholder through its Public Investment Corporation.
BHP's final proposal included several commitments to appeal to South African investors, politicians, and regulators, such as maintaining staffing levels at Anglo’s Johannesburg office and continuing Anglo’s charitable commitments in the country for at least three years.
BHP also pledged to establish “a centre of excellence” to support South African mining.
Nevertheless, Anglo stated that BHP had “not addressed the board’s fundamental concerns” about the forced separation of its South African businesses, adding that the “limited number” of socioeconomic measures proposed by BHP were “confined in scope, impact, and duration.”
Following discussions with shareholders, Anglo concluded there was no basis to extend the takeover deadline for the “highly complex and unattractive structure” of the proposed deal.
To fend off further advances from larger competitors, Anglo plans to implement its own corporate restructuring, including selling its platinum division and De Beers diamond arm.
This plan has received backing from the South African government.
Anglo's Chairman, Stuart Chambers, says that the company has laid out “a clear pathway to accelerate delivery of its strategy.”
“We look forward to delivering our plans for the benefit of our shareholders and for stakeholders, both in our host countries and more broadly,” he said.
Anglo’s extensive copper reserves are a major attraction due to copper’s role in low-carbon technologies such as solar farms and electric vehicles.
Beyond BHP, Anglo has reportedly attracted interest from Australia’s Rio Tinto and Swiss mining company Glencore.
BHP’s decision not to proceed with the bid has been seen positively by investors, with some commending the company for showing discipline in the attempt.
BHP can only revisit the possibility of acquiring Anglo after six months, unless another party makes a bid for Anglo in the interim.