Anglo issues ultimatum to BHP after declining to extend talks

Duncan Wanblad, CEO, Anglo American

ANGLO American asked BHP to submit a takeover offer by 5pm (UK time) today or walk after its board unanimously chose not to extend discussions over the Australian firm’s proposed all-share transaction.

BHP earlier on Wednesday detailed proposals, including an unquantified break-fee and socio-economic investments, aimed at lessening the impact of its proposed takeover structure which first asks Anglo to dispose of its Johannesburg-listed platinum and iron ore businesses.

Anglo responded three hours later describing BHP’s new proposals during “extensive” talks over the past seven days, as “limited” while failing to address concerns about deal structure which remained “highly complex” and “unattractive”.

Anglo said its restructuring plan, unveiled on May 14 – in which it would sell De Beers and its metallurgical mines, and unbundle platinum producer Amplats – was less risky for its shareholders.

On May 22, Anglo extended a deadline in terms of the LSE’s put up or shut up (PUSU) regulation to give BHP time to make changes to the structure of its proposed takeover, which were leaked in the media on April 24.

Anglo said today BHP’s takeover proposal – which it described as “unprecedented” – was likely to take more than 18 months to implement without guarantee of completion. At the same time the overhang cost on Amplats and Kumba shares would be borne by shareholders, it said.

“BHP has not addressed the board’s fundamental concerns relating to the disproportionate execution risk associated with the proposed structure and the value that would ultimately be delivered to Anglo American’s shareholders,” said Anglo in its announcement.

Anglo said there had been “extensive enagement” with shareholders on BHP’s proposal, adding there was “no basis for a further extension to the PUSU deadline”.

It added that while BHP sought to play down the deal risks it was not prepared to amend its proposal in such a way that its shareholders bore the risks. Some of the socio-economic ideas suggested by BHP were for only three years, Anglo added.

If BHP declines to submit a firm offer – which seems likely given its stated position is to transact for value – it is not permitted to make a fresh proposal for Anglo for six months in terms of PUSU.

BHP responded to Anglo’s statement saying the group fundamentally refuted Anglo’s conclusions especially regarding the burden of risk. It also disagreed with Anglo’s view that its socio-economic plans in South Africa fell short.

BHP said it had offered to retain Anglo’s Johannesburg office for three years where it would imposed a freeze on job cuts.