BHP abandons US$49B bid for Anglo

BHP (ASX: BHP) is walking away from its US$49.2 billion offer for Anglo American (LSE: AAL) after the companies couldn’t agree on how to handle the target’s platinum assets in South Africa. 

“BHP will not be making a firm offer for Anglo American,” CEO Mark Henry said in a statement published minutes before the 5 p.m. United Kingdom time deadline for the mining giant to make a formal bid.

“While we believed that our proposal for Anglo American was a compelling opportunity to effectively grow the pie of value for both sets of shareholders, we were unable to reach agreement with Anglo American on our specific views in respect of South African regulatory risk and cost.”

The move quashes the largest mining deal in the works so far this year. BHP must wait at least six months to make another offer for Anglo, unless someone else submits a bid for the London-based copper and platinum producer. 

Anglo said after the market closed the company had set out “a clear pathway” to accelerate delivery of its strategy and “to unlock significant value” for its shareholders. “Our shareholders will benefit from value transparency and undiluted exposure to a simpler portfolio of world class assets,” chairman Stuart Chambers said.

Time denied

Earlier on Wednesday, Anglo had rejected BHP’s petition to extend takeover talks, arguing the world’s largest miner had failed to address its concerns over the “highly complex and unattractive structure” of the proposed deal. Anglo denying BHP more time put a deal in doubt, analysts said. The proposed takeover structure is too complex for BHP to go hostile, RBC said in a note to investors on Wednesday.  

The companies were focused on finding a satisfactory deal structure since May 22, when Anglo rebuffed BHP’s third bid. BHP wanted Anglo to divest its Johannesburg-listed platinum company Anglo American Platinum, as well as Kumba Iron Ore.

Anglo said the spinoff of the majority stakes would create excessive risk for its own investors, who will end up holding those shares. It wanted BHP to alter the proposed structure or compensate its shareholders for any loss of value as a result of the spinoffs.

BHP had said the risks associated with its takeover plan were “quantifiable and manageable.” It said the costs of the proposed measures had already been incorporated into its offer.

All about copper

BHP’s main interest in targeting Anglo was its copper mines. An electrified world is becoming increasingly dependent on battery metals, particularly on copper, and BHP is eager to secure a leading position in this market. A tie-up would have given the mining giant about 10% of global copper production at a time when copper prices are hitting record-highs. They have climbed about 23% so far this year.

A successful deal would have reshaped the mining industry and boosted BHP’s presence in the world’s top copper producing countries, Chile and Peru. It would have made it the world’s largest producer of the metal, far surpassing Chile’s state mining company Codelco.

Anglo American, which traces its roots in South Africa to its founding 107 years ago, did come up with its own sweeping break up plan. It included keeping its copper and iron ore assets, the two most profitable units, and reducing investments in its Woodsmith fertilizer project in northern England. Despite some investors urging Anglo to shelve or offload the project, the company has not been ready to part ways with it. Instead, it plans to find strategic investors who can support the resumption of full-scale operations at Woodsmith starting in 2026.

BHP’s concessions

BHP’s offer committed to keeping Anglo’s office in Johannesburg fully staffed and listing BHP shares on the South African market. The company also mentioned its willingness to contribute to a potential increase in South African employee ownership of the two units, if necessary. These measures would have been upheld for a minimum of three years following the completion of a takeover. 

CEO Henry also expressed openness to negotiating a break fee in the event that regulatory authorities, including those in South Africa, block the potential deal.

Shares in Anglo American fell almost 4% to close on Wednesday in London at £24.58 apiece, valuing the company at £32.9 billion. BHP’s stock in New York gained less than 1% on Wednesday afternoon in New York to US$59.79 each for a company market value of $152.2 billion.