City bets on another BHP offer as Anglo American rejects ‘opportunistic’ bid

Mining giant Anglo American has rejected BHP Group’s £31.1bn proposal after concluding the plan would undervalue its future prospects.

The talk of a potential mega-deal from BHP to buy up London-listed miner Anglo American had the mining world attention. As hours after the news of the talks was confirmed by Anglo, its share price has jumped by more than 12 per cent,

There was warnings from South Africa’s minerals resources Minister who warned that his country’s previous experience with BHP was “not positive” in the wake of the group’s mega-deal bid for Anglo American.

However, Anglo American announced on Friday that it had rejected BHP proposal.

The announcement provided detail on what the plan looked like which include an all-share offer for Anglo American by BHP, with a requirement for Anglo American to complete two separate demergers of its entire shareholdings in Anglo American Platinum and Kumba Iron Ore to Anglo American shareholders.

The all-share offer and required demergers would be inter-conditional.

The Anglo American board concluded that the proposal significantly undervalued its future prospects.

In addition, the board believed the proposal contemplates a structure which is highly unattractive for Anglo American’s shareholders, given the uncertainty and complexity inherent in the proposal, and significant execution risks.

Commenting on the news, Stuart Chambers, chairman of 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.”

The BHP proposal is opportunistic and fails to value Anglo American’s prospects, while significantly diluting the relative value upside participation of Anglo American’s shareholders relative to BHP’s shareholders.

“The proposed structure is also highly unattractive, creating substantial uncertainty and execution risk borne almost entirely by Anglo American, its shareholders and its other stakeholders. Anglo American has defined clear strategic priorities – of operational excellence, portfolio, and growth – to deliver full value potential and is entirely focused on that delivery,” he concluded.

Yesterday, South African minister Gwede Mantashe told the Financial Times that he did not back the £31.1bn bid as BHP’s 2001 merger with South Africa’s Billiton “never did much for South Africa.”

“What we saw is that it dumped coal and then created a small company called South32, which is now marginal,” he added, clarifying that his comments were not an official government position.

BHP shares are currently down 1.47 per cent as it trades at 2.277 while Anglo America’s shares are also down 0.51 per cent to 2,545.50.