A BUMP in price and revised structure will be enough to tip Anglo American shareholders into accepting BHP’s takeover proposal, according to a report on Sunday.
As per the current proposal, BHP would spin off Anglo’s shares in Anglo American Platinum (Amplats) and Kumba Iron Ore before completing the group’s takeover. However, shareholders in the UK-listed firm would prefer BHP bid for the entire company so has to reduce the proposal’s conditionality.
A London-based fund manager who holds Anglo stock told the newspaper: “BHP needs to understand how complex this deal looks to investors. They are going to end up with all sorts of bits and pieces. I would prefer BHP to do the heavy lifting and take away all of Anglo”.
Another British money manager said: “It’s difficult to arrive at what the value would be because of these pre-conditions attached. Ditching those would make things a lot easier.”
However, a third significant shareholder said the complexity was “not a priority” and they were more focused on the price BHP was offering.
BHP may well improve its proposal this week in terms of the LSE’s ‘put up or shut up’ regulation which falls due May 22. If the Australian firm doesn’t make a firm offer by then, it will be restricted from visting the transaction for another six months.
“We expect BHP to make another offer before May 22nd 5pm ‘put up shut up’ deadline. Of course, now that Anglo has its own radical plan, any BHP offer will be more challenged than before,” said Liberum Capital’s Ben Davis in a note on Friday (May 17).
He suggested “a big premium” of 35% over BHP’s last £27/share proposal and a “radical change in structure” potentially involving a joint BHP/Glencore offer. That would be one way of successfully achieving a takeover, he said. A third option would be “more time”.
Anglo CEO Duncan Wanblad set down his firm’s own plans aimed at unbundling Amplats, selling or demerging De Beers, and selling the coal mines in Australia which is expected to net Anglo enough money to significantly de-gear the balance sheet.
But Liberum argued that if Wanblad failed to deliver on these plans, BHP’s offer “will likely stay on the table”.
Shares in Anglo fell about 6% since Wanblad delivered his restructuring strategy. This either signalled low confidence in Wanblad’s plans, or BHP is unlikely to win a mandate for a higher offer – with the latter viewed likelier by JP Morgan analyst, Dominic O’Kane.
“Anglos shares now trade at the greatest discount (-13.6%) to the implied value of BHPs offer, implying that the market assigns a low probability to BHPs ability to raise its offer and achieve an agreed deal,” he said in a report.
