BHP has reportedly decided against pursuing a new offer for rival Anglo American due to a significant increase in Anglo’s share price, making any potential deal too costly for the Australian mining giant.
In the past year, Anglo American has undertaken a major restructuring initiative, which gained investor approval and coincided with BHP’s earlier attempt to acquire the company for £39 billion. This plan includes selling off its coal, platinum, and diamond operations.
Sources familiar with the matter reveal that while BHP has been observing Anglo’s developments, it considers the current share valuation too high for a new bid. Over the last year, Anglo’s share prices surged by 40%, in stark contrast to BHP’s 17% drop, attributed to falling iron ore prices and challenges in the Chinese real estate market.
George Cheveley, a fund manager at Ninety One, commented that it’s hard to see why BHP would offer more than its previous valuation, given the apparent overvaluation of Anglo’s shares at present.
Anglo’s restructuring is aimed at forming a more focused company, with 54% of its revenues projected to come from copper, complemented by iron ore sales. Last year, Anglo raised $4.9 billion from selling its coal assets in Australia and is reportedly close to securing a deal for its nickel mines in Brazil, with an announcement expected soon. The spin-off of its platinum division is anticipated this year, while the initial public offering of its De Beers diamond business might extend into the following year.
Current trading values indicate that Anglo’s shares are about 3% higher than what BHP’s last all-share offer was in May of the previous year. Analyst Ben Davis suggested that a new bid from BHP might emerge after Anglo completes its platinum spin-off, indicating that the company could present a different profile following these changes.
Acquiring Anglo’s copper assets, particularly their stakes in prominent mines in Chile and Peru, was a primary incentive behind BHP’s earlier bid. Although BHP claims to focus on its existing copper projects, these initiatives require substantial investment, recently revealing a need for up to $10 billion to enhance production at Chile’s Escondida copper mine.
BHP also made headlines with its recent $3 billion acquisition of an underdeveloped copper project in Argentina, known as Filo del Sol, in partnership with Lundin Mining.
BHP CEO Mike Henry clarified that the company is not pressured to make any urgent transactions. He emphasized that BHP only seeks out deals that involve the right commodities, possess long-term value, and can be improved through their oversight. He acknowledged the stringent criteria the company applies to potential transactions.
Under Catherine Raw, the new chief development officer who joined last April, BHP has restructured its mergers and acquisitions team to streamline functions that were previously divided regionally.
BHP holds the option to propose a new bid for Anglo following the end of a six-month standstill period by late November, in line with London’s takeover regulations.