BHP is putting plans to take over minerals rival Anglo American on ice
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BHP has cooled on its comeback with another bid for rival miner Anglo American, according to people close to the company, with rising Anglo share prices making the deal too expensive for the Australian group.
London-listed Anglo launched a radical restructuring plan last year amid an ultimately failed BHP39 billion takeover bid, with plans to divest its coal, platinum and diamond businesses well received by investors.
Australia-based BHP has been closely monitoring Anglo’s progress but believes the miner’s shares have become too expensive to justify a new offer in the short term, according to three people close to the situation.
Anglo’s share price has risen 40 per cent over the past 12 months, while BHP has fallen 17 per cent over the same period on the back of lower iron ore prices and a weak Chinese property market.
“That being said, if BHP was bidding what they thought was fair value, it’s hard to see why they would bid more now,” said George Cheveley, fund manager at Ninety One, an investment manager.
Angle’s ambitious restructuring plan would create a smaller company in terms of revenue, but one that is more focused, with 54 percent of revenue coming from copper and the rest from iron ore.
Anglo last year secured $4.9 billion for its coal assets in Australia and is closing in on a deal for its nickel mines in Brazil, with an announcement expected in the coming weeks. A South African platinum business is expected to launch this year, while De Beers Diamond’s initial public offering could stretch into next year, the company said.
Angle’s shares are trading about 3 percent higher than the value of BHP’s final offer last May, according to calculations by Ben Davis, an analyst at RBC.
A renewed bid would be more likely after Anglo spun off its platinum business, he said. “It will be a different company after the restructuring changes,” he said. “I feel there is already a premium with the offer today.”
Maintaining Anglo’s copper assets – particularly its stake in the Collahuasi mine in Chile and the Quellaveco copper mine in Peru – was a key part of the rationale for BHP’s original bid for Anglo.
BHP said it was focused on investing in existing copper assets. But it’s expensive: The company revealed last year that it needs to spend up to $10 billion to ramp up production at its Escondida copper mine in Chile.
The company recently completed the $3 billion purchase, along with Lundin Mining, of the undeveloped Argentine copper asset, Filo del Sol.
“There is no transaction that is a ‘must do’ transaction” for BHP, chief executive Mike Henry told the Financial Times in December.
He added that the company only pursues contracts when it comes to real goods, real fixed assets, and when the added value can unlock ownership of BHP. “It’s a pretty strict set of tests. There aren’t that many options that meet all those criteria,” he said.
Under chief development officer Catherine Raw, who joined the company last April, BHP recently restructured its mergers and acquisitions team to consolidate certain functions globally, which were previously split along regional lines.
Under London’s takeover rules, BHP is allowed to renew its bid for Anglo, if it chooses, after a six-month standstill period expires at the end of November.
Additional reporting by Susannah Savage