BHP’s £38m tilt for Anglo ends in failure, and recrimination

BHP’S £38m tilt for Anglo American ended in failure on Wednesday afternoon after the Australian mining group announced it would not submit a formal takeover offer.

This was after Anglo refused to extend talks, saying during an all-action day that the risks of BHP’s proposed takeover remained too large for shareholders. While BHP had twice increased the value of its all-share proposal for Anglo, it had not sufficiently addressed structural concerns, said Anglo.

Mike Henry, CEO of BHP said the group’s plans to derisk the takeover was given an insufficient hearing. Commenting in a statement to the London Stock Exchange, Henry said that despite “numerous requests, we were not able to access from Anglo American key information required to formulate measures to address the excess risk they perceive”.

BHP offered 0.8860 of its shares for each Anglo share valuing Anglo at £29.34 per share on its undisturbed price (April 23). This represented a significant advance on BHP’s initial offer, which came to light on April 24, of around £25/share.

But the structure of the proposal was largely unchanged throughout in which BHP wanted Anglo to unbundle its shares in Johannesburg-listed businesses, Anglo American Platinum (Amplats) and Kumba Iron Ore before completing the takeover.

Anglo, which described its discussions with BHP as “extensive”, said the risks to its shareholders of clearing regulatory procedures in South Africa were “disproportionately high”. This was despite BHP submitting a subsequent proposal, disclosed this morning, in which it would share the costs of the structure, install a break-fee clause in the event of deal failure, as well as continue to invest in Anglo’s social investment schemes in South Africa through a Johannesburg office.

“We remain of the view that our proposal was the most effective structure to deliver value for Anglo American shareholders, and we are confident that, working together with Anglo American, we could have obtained all required regulatory approvals, including in South Africa,” said Henry.

Spotlight on Wanblad

The spotlight now inevitably falls on Anglo CEO Duncan Wanblad. On May 14, he outlined the results of a profound and fair-reaching strategic review in which his group would unbundle Amplats in a structured process, and sell De Beers as well as its metallurgical coal mines in Australia. He also promised to slow spending on the firm’s Woodsmith fertiliser minerals project in the UK.

Stuart Chambers, Anglo chairperson, today thanked shareholders for their support and added that the group had “set out a clear pathway to accelerate delivery of its strategy”.

Questions, however, will be posed as to how Wanblad manages this process especially as he promised to complete it in 18 months, compared to the two-year process Anglo imputed to BHP’s restructuring and takeover proposal.

Wanblad will most likely have to engage with a coalition government in South African which is holding national elections amid expectations the ANC will fail to command a majority. He will also have to manage the sale (or listing) of De Beers which is 15% owned by Botswana. President Mokgweetsi Masisi, president of Botswana since 2018, has previously stated he would vigorously defend his country’s economic rights in the diamond miner.

In addition, there is also the outside possibility of another interested bidder for Anglo while simultaneously hoping to improve the operating performance of the group’s copper production which suffered last year.