BHP Group Ltd. proposed a takeover of Anglo American Plc, valuing the smaller mining company at 31.1 billion pounds ($38.8 billion). That deal would catapult the combined company’s copper production well beyond that of its closest competitors while triggering the industry’s biggest shakeup in over a decade.
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(Bloomberg) – BHP Group Ltd. proposed a takeover of Anglo American Plc, valuing the smaller miner at 31.1 billion pounds ($38.8 billion). This deal would catapult the combined company’s copper production well beyond that of its closest competitors while triggering the biggest shakeup in the industry in over a decade.
The world’s largest mining company has proposed an all-share deal in which Anglo would first cede controlling stakes in South African platinum and iron ore companies to its shareholders before being taken over by BHP. The total per share value of the non-binding offer is about £25.08, BHP said, representing a 14% premium to Anglo’s closing share price on Wednesday.
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Anglo shares rose 13% to £24.91 apiece in London on Thursday morning, giving it a market value of £30.5 billion. BHP, valued at about $144 billion, fell 3.7%.
Working with Anglo would secure BHP about 10% of the world’s copper mining supply ahead of an expected supply squeeze that many market watchers have predicted will drive up prices. If successful, the deal would mark a return to large-scale deals for BHP and potentially deter other suitors also looking to increase their exposure to the metal, which is closely linked to the global energy transition.
Anglo American has long been seen as a potential target among the largest mining companies, particularly because it has attractive South American copper operations at a time when most of the industry is looking to increase reserves and production. However, applicants were put off by the complex structure and mix of other raw materials from platinum to diamonds, and in particular by the strong South African bias.
Anglo suffered a series of major setbacks last year as prices for some of its key products collapsed and operational difficulties forced the company to slash its production targets – lowering its valuation and leaving the company vulnerable to potential bidders.
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The company said in a statement late Wednesday that its board was reviewing the proposal, which it confirmed after Bloomberg first reported BHP’s interest.
Read: Anglo American reports sharp decline in profits, cuts dividend
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A successful takeover would be the first mega-deal between the world’s largest diversified mining companies in over a decade. BHP and its biggest rivals have been on the sidelines for years after a series of disastrous deals, but expectations are growing that the industry is heading for a wave of mergers and acquisitions as the companies have plenty of cash and management teams have worked hard to attract investors to convince you that you have learned from the mistakes of the past.
“If BHP does indeed pursue this deal, we would be surprised if no other bidders emerged,” Jefferies LLC analysts led by Christopher LaFemina said in an email note. An offer valuing Anglo at $42.6 billion – a 28% premium to its current share price – could result in a deal “across the finish line”, they said.
BHP bought copper producer OZ Minerals Ltd last year. for around $6.4 billion as its first major purchase in years, but has otherwise focused on selling assets such as oil, gas and coal.
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The clear temptation here would be Anglo’s South American copper business, which has long been eyed by larger industry players – although the company has suffered recent setbacks and had to lower its copper production forecasts.
BHP produced around 1.2 million tonnes of copper on an equity basis in 2023, while Anglo’s production was 826,000 tonnes. That would give the combined group a share of about 10% of global mining supply. Jefferies said antitrust issues would “likely pose a problem” for the deal because governments view copper as a strategic mineral.
It is also possible that Anglo’s proposal could now prompt others to make a move. Second-largest miner Rio Tinto Group has also invested in copper production, while Glencore Plc made an unsuccessful bid for Teck Resources Ltd last year. which had a coveted copper business, before ultimately striking a deal for the Canadian company’s coal assets.
Read: BHP whets appetite for deals with biggest rivals in sight
Anglo’s valuation may make it more attractive, but it remains an extremely complicated business. The company owns controlling interests in two mining companies listed in South Africa – Anglo American Platinum Ltd. and Kumba Iron Ore Ltd. – and is the majority owner of the diamond mining company De Beers. It also has a long and complicated relationship with South Africa, where the state pension fund manager is its largest shareholder.
BHP’s proposal was to first hand over Anglo’s shares in the two South African companies to the smaller company’s investors before proceeding with the takeover, Anglo said. The two parts of the proposal are “interconditional,” it said.
Anglo’s other businesses include copper, nickel, steel coal and Brazilian iron ore, as well as the legendary De Beers business.
Both companies are also investing in new fertilizer businesses – BHP is building a huge potash mine in Canada, while Anglo is developing a polyhalite mine on the east coast of England.
(Updates with details throughout.)
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