29th May 2024 13:39
(Alliance News) - BHP Group Ltd requested an extension to the Wednesday deadline for its takeover offer for mining peer Anglo American PLC, but Anglo unsurprisingly rejected this.
"Like a desperate student running out of time to hit a deadline, BHP is asking for yet another extension to the cut-off for making a formal bid for Anglo American," said AJ Bell investment analyst Dan Coatsworth early Wednesday.
"The company says it has made significant concessions to help get the deal across the line – particularly relating to the sensitive situation in South Africa which has a vested interest in the transaction. With the put up or shut up point being hit today, there is precious little time to waste if the takeover is going to happen."
Anglo denied the extension, saying BHP's latest proposal remains confined in "scope, impact and duration".
Last week, the Melbourne-based miner's third GBP34 billion takeover proposal was rejected by London-based Anglo American.
BHP offered 0.8860 of a BHP share for each Anglo share.
Shares in BHP were trading up 1.3% to 2,366.00 pence each in London on Wednesday afternoon, while Anglo American was down 1.5% to 2,518.50p each. BHP has a GBP119.61 billion market capitalisation, while Anglo's is GBP34.71 billion.
Anglo American turned down the offer saying it included the same "highly complex structure" as those previously rejected on April 26 and May 13, as well as a risk to shareholder value.
The all-share offer by BHP, also required Anglo American to move away from its operations in South Africa and complete two demergers of its shareholdings in Anglo American Platinum Ltd and Kumba Iron Ore Ltd.
"The requirement to pursue two contemporaneous demergers of publicly listed companies alongside a takeover and the inter-conditional nature of the three transactions is unprecedented, and as a result of a takeover would result in additional material approvals and conditions, particularly in South Africa," Anglo American said.
Over the past week BHP has made an effort to address the concerns and proposed a range of socioeconomic measures to rectify value uncertainty issues relating to the proposed transition structure, it said.
The company further indicated a willingness to discuss a reverse break fee, payable by BHP, should it fail to secure regulatory and anti-trust approvals.
BHP's offer still requires the distribution of Anglo American's holdings in the two companies to shareholders prior to completion, but BHP outlined a plan to maintain Anglo American's levels of employment in South Africa and to provide funding to support training and charitable commitments for a three year period.
BHP intends on maintaining a listing on the Johannesburg Stock Exchange with a weighting of approximately 5%.
Analysts at Berenberg said they were "not surprised" by Anglo's rejection of the extension request "given the continued emphasis by Anglo's board on the disproportionate execution risks associated with the proposed structure and the value that would ultimately be delivered to Anglo's shareholders."
Earlier this month, to fend off the BHP approach, Anglo unveiled a new "radical" strategy that will see it keep copper and iron ore assets, while getting rid of platinum and diamond businesses.
On Wednesday, Anglo argued: "The BHP proposal is in clear contrast to Anglo American's simpler standalone plan to accelerate value delivery."
It added: "The complex structure proposed by BHP is likely to take more than 18 months to implement, throughout which there would be material risks to completion and uncertainty around the value delivered to Anglo American's shareholders, regardless of whether regulatory approvals are ultimately received or not."
BHP now has until 1700 BST to put forward a firm offer.
Analyst at Berenberg said "it is unlikely that BHP puts forward a firm offer before today's deadline."
"On balance, as we have said in previous commentary, we expect the bid to fail, and subsequently expect a positive reaction in BHP's shares and a negative reaction in Anglo's shares," they added.
By Sophie Rose, Alliance News senior reporter
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