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BHP has cooled on returning with another bid for rival miner Anglo American, according to people close to the company, with the rise in Anglo’s share price making a deal too expensive for the Australian group.
London-listed Anglo launched a radical restructuring plan last year, in the midst of BHP’s ultimately unsuccessful £39bn takeover attempt, with plans to dispose of its coal, platinum and diamond businesses that were well received by investors.
Australia-based BHP has been closely monitoring Anglo’s progress but believes that the miner’s shares have become too expensive to justify a fresh bid in the near 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’s has fallen 17 per cent in the same period on the back of lower iron ore prices and a weak Chinese real estate market.
“On the face of it, if BHP were bidding what they thought was fair value, it is difficult to see why they would bid more now,” said George Cheveley, fund manager at Ninety One, an investment manager.
Anglo’s ambitious restructuring plan would create a smaller company in terms of revenues but one that is more focused, making 54 per cent of its revenues from copper and the rest from iron ore.
Anglo secured $4.9bn for its coal assets in Australia last year and is nearing a deal for its nickel mines in Brazil, with an announcement expected in the coming weeks. A spinout of its South African platinum business is expected this year, while the initial public offering of the De Beers diamond business could stretch into next year, according to the company.
Anglo’s shares are trading about 3 per cent higher than the value of BHP’s final all-share offer in May last year, according to calculations by Ben Davis, analyst at RBC.
A renewed bid would be more likely after Anglo spins out its platinum business, he said. “It will be a different company after those restructuring changes,” he said. “I feel there is already a bid premium in the shares today.”
Getting hold of 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 has said it is focused on investing in its existing copper assets. But that is costly: the company revealed last year that it needed to spend up to $10bn to boost production at the Escondida copper mine in Chile.
The company recently completed the $3bn purchase, together with Lundin Mining, of an 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 deals when it is for the right commodity, the right long-life assets, and when extra value can be unlocked by BHP’s ownership. “That’s a pretty strict set of tests. There are not that many opportunities that meet all of 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 had previously been split along regional lines.
Under London takeover rules, BHP is allowed to renew its bid for Anglo, should it wish to do so, following the expiration of a six-month standstill period in late November.
Additional reporting by Susannah Savage
