Can BHP sway Anglo shareholders without a sweetener?

Mike Henry, CEO, BHP

BHP is to give its proposed £38m takeover of Anglo American one final push this week, but it’s unlikely to involve a price change.

Central to its efforts will be isolating Anglo’s concerns about the unbundling of its platinum and iron ore businesses, as per BHP’s deal structure, and get agreement from shareholders these risks can be dismantled collaboratively. In this context, a nuanced structural change can be managed – in BHP’s view.

BHP’s contention with investors will be that regulatory risk in South Africa is a smokescreen that occludes the value offer, especially for a company so brushed up on the process of dealmaking. Between January 2022 and October 2023, BHP scrapped its dual-listed structure, merged its oil and petroleum assets with Woodside Energy, approved the $4.9bn investment in Jansen potash, and bought Oz Minerals.

Anglo’s argument, however, is not that South Africa is uniquely hostile to incoming mega-deals, but that there’s no easy template for how socially consequential this particular deal is.

Making a yet finer point, Adam Matthews, chief responsible investment officer for the Church of England Pensions Board, argues not that BHP under-estimates process but if the deal should be done at all, regardless of difficulty.

On Monday he doubled down on the board’s statement earlier this month that a takeover of Anglo served “short term financial interests” to the detriment of “our long-term interests as a pension fund”.

“Whatever ends up happening here asset owners need to take a step back and consider how they invest and steward the sector as well as how their fund managers interpret the long term interest in such situations,” Matthews said in a post on his Linked-In account.

He warns against capitalist greed on ethical grounds. As for the ANC-led government, it has ideological concerns, but winning that argument may not be so forbidding for BHP. Government tends to be cynical about big business, regardless of the logo in question.

There is, however, no escaping at least some impact to South Africa if BHP’s pitch is successful. JP Morgan explained some of these in a report last week. It put a number to the “downside risk” to Amplats’ and Kumba’s shares, and identified an $4.3bn outflow from South Africa, potentially denting the recently resurgent rand. (Unreported were comments by the bank’s analyst Catherine Cunningham that unbundling Amplats and Kumba were “highly unlikely to all happen on the same day”.)

Analysts’ valuable insights aside, the best window on deal outcome is what investors are doing with their money. Shares in Anglo on the JSE have bobbed up and down a few rands but are largely unchanged since last Tuesday.

What does this say? Either the market is confident of another extension to the already extended PUSU deadline of May 29, or it thinks Anglo’s shareholders will only be swayed by a deal sweetener or meaningful structure change.