BHP makes second attempt to buy Anglo American

Company News

by Glenn Dyer

BHP (ASX:BHP) has made a second attempt to buy Anglo American, offering a revised bid worth 34 billion pounds or $US42.7 billion — and Anglo immediately rejected it for a second time.

Anglo said it received the new offer on May 7. (Why didn’t BHP inform the market of the new attempt?) It was rejecting it because it was “highly unattractive” for shareholders.

The new offer is worth 2.9 billion pounds more than the first bid at 31.1 billion pounds.

The new offer lifted the merger exchange ratio. The rejected bid would have lifted Anglo American shareholders’ aggregate ownership in the combined group to 16.6% from 14.8% in the earlier proposal.

The second offer was also contingent on Anglo selling its shares in South African iron ore company, Kumba, and Anglo American Platinum.

The key to the takeover would see BHP control 10% of annual global copper production, enhancing its presence in leading copper-producing nations such as Chile and Peru.

It would also lift its exposure to coking coal from Anglo’s five mines in Queensland and add an iron ore fines export mine and business in Brazil to its 50% stake in the Samarco iron pellets operation owned with rival Vale.

Anglo American said in a statement that its board had considered the latest offer "and concluded that it continues to significantly undervalue Anglo American and its future prospects”.

"The revised proposal was rejected... BHP is disappointed that the Anglo American board has chosen not to engage with BHP with respect to the revised proposal and the improved terms,” BHP CEO, Mike Henry said in a statement.

The Financial Times’s Lex column was dismissive of the chances for success for BHP, saying in one of its commentaries on Monday:

"BHP is still asking Anglo to do the heavy lifting in what Liberum analysts call a “doomed” deal structure. That made it easy for Anglo’s board to reject, citing “significant execution risks”.

"Anglo could restructure itself and reap potential rewards without the overhang of BHP’s deal. Inspiring Anglo’s team to prise apart the company on BHP’s behalf would require a higher premium.

"The last pitch was 30 per cent above where Anglo’s shares were trading before BHP’s interest became public, a typical takeover premium. Note that Anglo’s shares were already trading near the revised offer, falling slightly on the news.

(In fact, Anglo shares fell 2.16% on Monday after news of the second offer emerged)

"BHP’s sweetener of two board seats for Anglo, and talk of a deal that “leverages the best” of both companies, doesn’t mask the fact that this is a takeover and dismemberment offer. It is hard to see these two sides coming together before the UK Takeover Code deadline of May 22," the Lex writer noted.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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