Anglo American rejects BHP’s US$39 billion acquisition proposal

MELBOURNE/LONDON (Reuters) – Anglo American on Friday rejected rival mining company BHP’s £31.1 billion ($39 billion) takeover proposal, saying the offer significantly undervalued the London-listed miner and their future prospects.

“BHP’s proposal is opportunistic and does not value Anglo American’s prospects, while significantly diluting the relative ownership of Anglo American shareholders relative to BHP shareholders,” Anglo chairman Stuart Chambers said in a communicated.

Reuters reported on Thursday, citing two sources, that Anglo management did not find the proposal attractive as some investors and analysts saw it as opportunistic.

BHP, the world’s largest listed mining company, on Thursday offered Anglo shareholders £25.08 per share, a 31% premium to Wednesday’s market close, making shares shares of Anglo, listed in London, rose 16%.

A condition of its proposal is that Anglo first distributes to shareholders its stakes in Anglo American Platinum and Kumba Iron Ore, both of which operate in South Africa, where BHP has no assets.

On Friday, Anglo said the framework offered was “highly unattractive… given the uncertainty and complexity inherent in the proposal, and the significant execution risks”

BHP had no immediate comment on Anglo’s rejection. Anglo shares fell 0.6% in early trading.

BHP shares closed down 4.6% in Australia on Friday. There was no trading in the company’s shares on Thursday, as the Australian stock market was closed for a public holiday.

Questions about jurisdictional risks in South Africa and other regions and concerns that Anglo American’s business has a lower margin than BHP’s have led to a sell-off of shares, said Kaan Peker, an analyst at RBC Capital Markets in Sydney.

“I think this uncertainty is resulting in a small reduction in what investors are willing to pay for future earnings,” Peker said.

Some BHP investors are also yet to be convinced of the deal’s merits.

“I’m a little surprised the deal isn’t a done deal. This likely means BHP will need to offer more to win over shareholders and management and risks creating damaging animosity,” said Brenton Saunders, portfolio manager at Pendal.

“The business is complicated, as Anglo has a complicated structure, with several moving parts, such as AngloPlats, Kumba and De Beers. It is unclear how BHP will add value to the business if it is required to offer considerably more.”

Consensus is growing that BHP will have to sweeten its offer to complete the deal. BHP has until May 22 to make a binding offer.

A deal, if successful, would be the world’s biggest mining acquisition by 2024 and would be among the sector’s top 10 deals, according to LSEG data.

Attention is now turning to antitrust concerns, with industry sources citing the regulators of BHP’s main customers, China for copper and Japan and India for steelmaking coal, as potential obstacles to the deal.