Anglo shares rise amid renewed takeover speculation

BHP (ASX: BHP) is free to relaunch a bid to acquire Anglo American (LSE: AAL) starting Friday, as the six-month standstill mandated by London’s takeover rules has expired, following the withdrawal of a previous offer. Anglo shares gained 5.2% to £25.17 (US$32.08) apiece on Friday in London.

Last month, BHP chair Ken MacKenzie stated at the company’s AGM that BHP had “moved on” from its bid for Anglo. However, BHP later clarified that MacKenzie’s comments were not intended as an official statement under UK takeover rules.

The UK Takeover Panel agreed not to treat his remarks as a formal declaration of intent not to make an offer.

This month, BHP CEO Mike Henry said in comments to the Financial Times that copper is such a strong commodity that the company would like to have more growth opportunities.

That sentiment was echoed by analysts quoted in the newspaper.

Hot on copper

Marina Calero, an analyst at RBC, said it’s likely BHP will make another approach for Anglo due to its strong copper portfolio.

The reasons for acquiring Anglo last April are still there, and copper demand is still high, said George Cheveley, a portfolio manager at Ninety One and a former BHP employee. 

Since BHP’s first offer in April, Anglo’s share price has risen 18%, while BHP’s has declined 11%, making an all-share deal potentially more expensive under the original proposal.

Jefferies analyst Chris LaFemina on Friday upgraded Anglo from hold to buy, raising its price target from £25.00 (US$31.74) to £28.50 (US$36.18). Anglo’s market capitalization stood at US$42.9 billion.

Revisit buy bid?

In April, BHP submitted an initial £31.1 billion (US$39 billion) scrip proposal for Anglo, which was rejected. The company subsequently increased its bid twice before walking away on May 29, citing capital discipline and concerns about South African regulatory risk and costs.

Despite the earlier withdrawal, speculation persists that BHP may revisit its pursuit of Anglo, driven by its ambition to expand its copper portfolio. Analysts believe copper remains a compelling factor, especially as BHP projects a global copper deficit of 10 million metric tons within a decade.

BHP has committed at least US$11 billion to copper-focused projects, including replacing a US$5 billion concentrator at the Escondida mine in Chile, which is grappling with declining ore grades.

Filo acquisition

In September, BHP and Lundin Mining (TSX: LUN) launched a $3 billion joint bid for copper explorer Filo Corp (TSX: FIL), which owns the Filo del Sol project on the Chile-Argentina border. BHP will also acquire 50% of Lundin’s Josemaria project for $690 million.

Meanwhile, Anglo American has taken strategic actions in response to BHP’s earlier interest. The company raised US$530 million by selling a 6.6% stake in Anglo American Platinum as part of a wider restructuring program. On Monday, it secured a US$3.8 billion deal for its remaining Australian coal mines.