BHP proposes £31bn takeover of Anglo American in mining mega-deal

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BHP proposes £31bn takeover of Anglo American in mining mega-deal

BHP has proposed a £31bn takeover of Anglo American that would bring together two global mining companies and rank as one of the industry’s largest transactions in years.

The world’s largest mining group said on Thursday that it had offered 0.7097 BHP shares for each Anglo share, as it sought to expand its portfolio of copper mines.

BHP said its offer valued each Anglo share at £25.08. Anglo shares rose 13 per cent to £24.89 in early trading in London, giving the company a market capitalisation of £30.5bn.

Demand for copper is expected to soar because of a global transition away from fossil fuels. The metal is heavily used in renewable energy projects and electric vehicles.

The deal would elevate BHP to rank as the world’s largest copper producer, up from the third largest currently, according to RBC. The combined group would generate more than 2mn tonnes of copper per year, about 10 per cent of global mined supply.

BHP said it would increase its “exposure to future facing commodities through Anglo American’s world class copper assets”. A tie-up involving the two listed groups would be one of the most influential in the mining sector since Glencore’s acquisition of Xstrata in 2013.

Anglo owns some of the sector’s most coveted copper mines in Peru and Chile, but chief executive Duncan Wanblad has come under intense pressure since December, when the company revealed big downgrades to its production forecasts. Anglo said it had received an unsolicited bid from BHP and was reviewing it.

Its De Beers diamond division and platinum metals unit have been hit by low prices. The company’s London-listed shares had fallen by more than a third since the start of last year before rising on the bid news.

Shares in BHP, whose primary listing is in Sydney and has a market capitalisation of A$229bn (US$149bn), fell 0.6 per cent to A$45.23 on Thursday.

Anglo said that as part of any deal, BHP was proposing spin-offs of two Anglo units — Anglo American Platinum, the platinum division known as Amplats, and Kumba Iron Ore. Both are listed in South Africa and account for about £10.2bn of the value under the BHP proposal.

The proposal is likely to cause controversy in South Africa ahead of the country’s general election in May.

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BHP said that Anglo American’s other operations outside copper, iron ore and metallurgical coal — such as the De Beers business — would be “subject to a strategic review post-completion”.

BHP’s approach to Anglo comes a year after the Melbourne-based mining company completed a A$9.6bn takeover of Australian rival Oz Minerals, which increased its exposure to copper.

The deal started a wave of transactions in the industry, but BHP management has since said it would be disciplined in its approach towards further M&A as it focused on integrating Oz and funding the development of its potash operations.

BHP dropped its primary listing in London in 2022, which simplified its corporate structure to better prepare it for potential consolidation opportunities following divestment of its oil and gas business, which merged with Australia’s Woodside in the same year.

Anglo, founded 107 years ago, is among the 25 most valuable companies on the London Stock Exchange, and BHP’s proposal is likely to fuel anxiety over the flight of companies away from the UK capital.

Some BHP investors said there was too little detail on whether the acquisition would appeal to shareholders, but others said it made sense given BHP’s focus on expanding its copper portfolio.

Andy Forster, senior investment officer from Argo Investments, which holds shares in BHP, said the deal would ultimately be judged by its cost. “It makes sense for copper, but as always with large complex transactions [it is] hard to complete without destroying value along the way,” he said.

Christopher LaFemina, an analyst at Jefferies, said in a note that “we would be surprised if this is BHP’s final offer as the price is clearly too low to succeed”, estimating that at least £28 per share would be needed for serious discussions to occur.

He added that rival bidders could emerge.

Anglo is being advised by Centerview, Goldman Sachs and Morgan Stanley. UBS and Barclays are advising BHP on the proposal, according to people familiar with the matter.

Bloomberg first reported that BHP was considering a takeover of Anglo. BHP has until May 22 to make a formal offer.

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