BHP offer values Anglo American at R742bn with De Beers future under review

BHP has published the details of its offer for Anglo American which values Anglo at £31.1bn (R742bn) equivalent to £25.08 per Anglo ordinary share which includes £4.86 in Anglo Platinum shares and £3.4 in Kumba Iron Ore shares.

Anglo shares closed Wednesday on the London Stock Exchange at £22 immediately before news of BHP’s offer broke so the offer amounts to a premium of 14% on Anglo’s last trading price.

BHP said the offer provides a premium on the implied market value of Anglo American’s unlisted assets of about 31% and a 19% premium to the broker median net asset value of Anglo American excluding Anglo Platinum and Kumba of $21.8bn.

In terms of the offer Anglo shareholders would receive 0.7097 BHP shares for each Anglo share held as well as their respective holdings of ordinary shares in Anglo Platinum and Kumba which would be distributed by Anglo to its shareholders.

In a statement released to the London Stock Exchange BHP said the proposal was non-binding and subject to “customary conditions including completion of due diligence to the satisfaction of BHP. Anglo American has been offered reciprocal due diligence on BHP.”

BHP commented the merger would increase BHP’s exposure to future-facing commodities through Anglo American’s world-class copper assets and would complement BHP’s iron ore and metallurgical coal portfolios with Anglo American’s high-quality iron ore operations in Brazil and metallurgical coal assets in Queensland, Australia.

BHP noted that, “Anglo American’s other high-quality operations – including its diamond business – would be subject to a strategic review post completion.”

According to BHP the combination of the two groups would bring together the strengths of BHP and Anglo “in an optimal structure.”

The offer proposal said, “Anglo American would bring its assets and long-term growth portfolio. BHP would bring its higher margin, cash generative assets and growth projects along with its larger free cash flows and stronger balance sheet.

“The combined entity would have a leading portfolio of large, low-cost, long-life Tier 1 assets focussed on iron ore and metallurgical coal and future facing commodities including potash and copper.”

The statement said that the combined entity would retain BHP’s global listings on the ASX, LSE, JSE and NYSE stock exchanges and that Anglo shareholders would be able to benefit from BHP’s monthly share trading liquidity of around $10bn.

BHP cautioned that “this announcement does not amount to a firm intention to make an offer and there can be no certainty that an offer will be made.”

BHP also confirmed LSE requirements that it must announce a firm intention to make an offer for Anglo by 5pm on May 22 or announce it does not intend to make an offer.