Anglo American has rejected a revised buyout offer from BHP Group, valuing the company at 34 billion pounds ($42.67 billion), stating that the world's largest listed miner "continues to significantly undervalue" the company. The rejection comes after Anglo American had already turned down BHP's initial $39 billion all-share takeover proposal on April 25, dismissing it as opportunistic and dilutive to its shareholders' upside value relative to BHP's.
In a statement on Monday, Anglo American's chairman, Stuart Chambers, said, "The latest proposal from BHP again fails to recognise the value inherent in Anglo American." The new offer, made on May 7, represented a 10% increase from BHP's first proposal, or a 15% increase in the merger exchange ratio that would have lifted Anglo American shareholders' aggregate ownership in the combined group to 16.6% from 14.8% in the earlier proposal.
BHP CEO Mike Henry expressed disappointment at the rejection, stating, "BHP continues to believe that a combination of the two businesses would deliver significant value for all shareholders." The revised bid remains contingent on Anglo selling its shares in iron ore and platinum assets in South Africa, a structure that Anglo finds unattractive.
Chambers further elaborated on the reasons for the rejection, saying, "The BHP proposal ... leaves Anglo American, its shareholders and stakeholders disproportionately at risk from the substantial uncertainty and execution risk created by the proposed inter-conditional execution of two demergers and a takeover."
Despite the rejection, Anglo American's share price reversed earlier losses to trade up 1.3% at 27.73 pounds by 1411 GMT. The company is attractive to its competitors for its prized copper assets in Chile and Peru, as the metal is expected to see increased demand due to the global shift towards cleaner energy and wider use of artificial intelligence. However, Anglo's wide portfolio also includes platinum, iron ore, steelmaking coal, diamonds, and a fertiliser project.
RBC Capital Markets analysts estimate that if Anglo were to divest its iron ore, diamonds, manganese, and PGM portfolio, the remaining entity would have approximately 70% exposure to copper. They calculate that 31 pounds per share could be realised from potential divestments, 13% higher than BHP's revised offer.
BHP had offered Anglo American shareholders 27.53 pounds per share, up from 25.08 previously, and has until May 22 to log a binding offer. Both companies have been meeting with investors since April's initial approach, which followed a review of all Anglo's assets initiated in February in response to a 94% plunge in annual profit and writedowns at its diamond and nickel operations.
Anglo's investors have expressed concerns about potentially losing heavily by holding shares in the South African subsidiaries if they are unbundled. In March, Anglo picked investment bank RBC Capital Markets to begin a syndication process for its costly Woodsmith fertiliser project in northeast England, according to two sources. Another source said Anglo was looking for partners for its De Beers diamonds business, which is among the assets BHP has said it would review after completion of any deal.
