BHP’s High-profile Takeover of Anglo Puts Regulators in the Spotlight

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(Bloomberg) – BHP Group Ltd.’s bold approach. for Anglo American Plc will reshape the global mining industry if it succeeds as planned, and antitrust regulators from China to South Africa and Japan are likely to play as important a role as shareholders determine the bottom line.

The proposed $39 billion merger – rejected by its smaller rival – would create the world’s largest copper producer with about 10% of supply and bolster BHP’s already significant iron ore and coal operations. Anglo would also have to sell South African subsidiaries. That’s more than enough to trigger intense oversight from regulators concerned about the impact on market concentration and access to key minerals.

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As BHP, Anglo and their competitors consider their next steps, here is an overview of the global antitrust landscape.

China

While Anglo American produces a diverse range of raw materials in more than a dozen countries around the world, the biggest likely antitrust obstacle to its ambitions is clearly focused on copper. Given the metal’s role in the energy transition, this is at the core of the deal’s rationale for BHP, but also a major concern for governments everywhere – nowhere more so than in China, the metal’s largest consumer.

“I absolutely expect China will complain, period,” Allan Trench, a professor at the University of Western Australia Business School, told Bloomberg, pointing to concerns about copper concentrate. That part of the market – the semi-processed form of the metal – has been in very short supply this year, forcing smelters into weakening competition for supplies.

Beijing has a proven track record of forcing an acquiring company to make selective divestitures to gain antitrust approval. In 2013, Glencore Plc secured a $30 billion takeover of Xstrata Plc – but after the company agreed to sell the Las Bambas copper mine in Peru after Chinese regulators raised concerns. The asset went to a Chinese producer.

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However, a lot has changed since then. It is unclear whether Beijing will be able to impose a penalty and benefit from the remedy in 2024. Trade tensions between China and Western nations are more pronounced, including over strategic minerals and Beijing’s dominance in green technology.

The shift to cleaner fuel has also driven up expectations for copper demand, while miners find it increasingly difficult – and costly – to get new mines online.

“Glencore’s bid for Group. “It was before the green energy transition that is driving the demand outlook today.”

Lester Ross, a partner at law firm WilmerHale, said Beijing had concerns and stressed that China wanted to ensure supplies were not affected. “The most important thing – more than pricing – is simply access to and control over the resource,” Ross said.

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Peter Arkell, chairman of the Global Mining Association of China and managing director of consultancy Carrington Day, said both BHP and Anglo were good suppliers to the Chinese market: “Both have very close ties with China, so I don’t think they are out “From this point of view, China will be concerned.”

Of course, China could still benefit from the deal if metals heavyweights like China Minmetals Corp. Acquire assets that BHP wants to sell – or is forced to sell.

South Africa

While Anglo has its roots in South Africa, BHP’s alleged deal includes as a condition the spin-off of its majority stakes in local platinum and iron ore companies to its shareholders. With the country’s upcoming elections, a nerve has already been touched.

This month’s election is a closely contested race and could see the ruling party lose its majority for the first time since the African National Congress came to power in 1994. The opposition has already portrayed the BHP bid as a sharp rebuke to the government’s handling of the economy in a country with one of the highest unemployment rates in the world and deteriorating infrastructure.

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“South Africans will be quite worried considering Anglo has historically played a significant role in the South African economy,” Arkell said. “From a South African regulator perspective, if a Chinese company were to participate in the discussion about some or all of Anglo’s assets, South African regulators might say, ‘Actually, we prefer that’.”

Chile

There could be a smoother development in Chile, where Anglo, among other things, has a stake in the huge Collahuasi mine. While authorities will consider the impact of the potential deal, they are not expected to impose significant restrictions since the country ships almost all of the copper it produces.

“From an antitrust perspective, there are no risks in Chile from a copper production perspective because Chile practically does not consume this metal,” said Juan Ignacio Guzman, head of GEM, a mineral consulting firm in Chile.

The Chilean competition authority, meanwhile, has declined to comment on antitrust issues as it was neither informed nor examined of the BHP proposal.

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Japan

Japanese authorities are also likely to use the slide rule in any transaction, partly because the addition of Anglo’s coal and iron ore mines in Australia and Brazil to BHP’s already extensive portfolio could shake up Japanese steel mills, which rely heavily on external supplies. In the steel and coal business, a combined company could account for up to 19% of all ocean shipments, although that’s less than BHP’s share in 2022, according to Bloomberg Intelligence.

rest of the world

Given the size and importance of the potential offer, BHP will need to notify competition authorities in countries or blocs such as the European Union beyond the dozen where Anglo produces materials. Back in 2012, EU authorities gave their seal of approval to Glencore’s takeover of Xstrata after Glencore addressed concerns focused on preserving competition in zinc and offered to sell its shares in what was then the largest producer of the metal.

“Many countries’ competition laws have extraterritorial reach,” said Wendy Ng, an associate professor at the University of Melbourne’s law school. “I expect that BHP-Anglo American will need to apply for a merger competition review in countries outside the 12 countries where Anglo operates,” she said.

BHP declined to comment for this story.

– With support from Sybilla Gross, Shoko Oda and William Clowes.

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