26th Apr 2024 11:54
(Alliance News) - Analysts expressed "no surprise" that Anglo American PLC had spurned an approach from BHP Group Ltd with an improved offer likely, and rival bid possible.
On Friday, Anglo American said its board has "unanimously" rejected an "opportunistic" offer from larger peer BHP Group Ltd, on grounds that it "significantly undervalues" the London-based miner.
This comes after Australia's BHP on Thursday confirmed it had offered to buy Anglo American in an all-share deal valuing the mining group at GBP31.1 billion.
As part of the proposed deal, BHP wants Anglo American to split off Anglo American Platinum Ltd and Kumba Iron Ore Ltd in South Africa.
Melbourne-based BHP said its unsolicited, non-binding and conditional offer will see Anglo American shareholders receive 0.7097 of a BHP share for every share share they hold in Anglo American. BHP tabled the offer to the Anglo American board on Tuesday last week.
In a formal response, Anglo American on Friday said its board had considered the BHP proposal with its advisers and concluded that the offer "significantly undervalues" the company and its future prospects.
"In addition, the proposal contemplates a structure which the board believes is highly unattractive for Anglo American's shareholders, given the uncertainty and complexity inherent in the proposal, and significant execution risks," Anglo American said.
"Anglo American is well positioned to create significant value from its portfolio of high quality assets that are well aligned with the energy transition and other major demand trends," Anglo American Chair Stuart Chambers said.
AJ Bell's investment director Russ Mould felt it was "no surprise" that Anglo American has rejected BHP’s takeover bid.
"Anglo American has long seen itself as one of the big players in the market and it certainly won’t let a rival swoop on the business when its chips are down," he remarked.
"The usual playbook for mega deals in the resources space is for the original suitor to respond to rejection by coming back with a better offer, or someone else throwing their hat into the ring," Mould said.
That contender could be Rio Tinto PLC, he suggested.
Liberum agreed that Rio Tinto could be a possible suitor.
"We do not believe that BHP has pitched its best and final yet. A revised bid is likely. What of an interloper? Rio Tinto is our top pick, for this role," it said.
However, Liberum pointed out Rio Tinto is "widely regarded as a builder, not a buyer," with management confirming this via recent market commentary.
"Rio Tinto would have undoubtedly examined a bid for Anglo American in the recent past, deciding that it would be too difficult," it stated.
"But things change, when a competitor makes a ‘low-ball’ bid like this one,"it added.
"All players get one opportunity to engage, before the moment passes forever."
Liberum believes a simpler bid from Rio Tinto, with no prior restructuring, would be superior to BHP’s.
Mould said Rio Tinto will "certainly be watching activities with keen interest given it can see the same opportunity as BHP."
Copper demand is expected to keep growing for years to come, Mould pointed out, and buying Anglo American is a "lot easier than drilling thousands of holes in fields and mountains in far-flung places in search of the metal."
"Exploration is a laborious process but acquiring a ready-made package of assets is a much easier task."
"There is always a right price to buy a company – we just haven’t got there yet with Anglo American," he concluded.
But Berenberg expressed doubts as to whether the deal would go through.
"Ultimately we are of the view that the deal will not take place, with the structure criticised by Anglo American."
"We cannot see BHP as logical owners of Anglo American Platinum or Kumba Iron Ore, but note that it could seek to create an African "national champion" and farm in Anglo American Platinum, Kumba Iron Ore, De Beers and Samancor to leave itself with the copper, metallurgical coal, nickel and polyhalite businesses but, under this scenario, it cannot control the value it can create for its shareholders."
Shares in Anglo American were down 0.8% to 2,542.50p pence each in London on Friday. They were down 1.1% at ZAR604.20 in Johannesburg.
BHP was down 1.6% at 2,2274.00p in London. They fell 1.8% to ZAR539.99 in Johannesburg. In Sydney, they closed down 4.6% AUD43.15.
Shares in Rio Tinto rose 2.0% to 5,486.00p in London on Friday.
By Jeremy Cutler, Alliance News reporter
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