BHP debates improved Anglo’s bid as time went on in the takeover saga

Mike Henry, Chief Executive Officer, BHP Group

Now all eyes are on BHP: At 5pm in London on Wednesday, the world’s largest miner must either announce a firm intention to make a bid or walk away for six months under British takeover rules.

BHP is considering making an improved proposal but has not yet done so, according to people familiar with the matter. The world’s largest miner would like to see a sign of commitment from Anglo to make a strong offer, some said, and one way to do that could be with a proposal attractive enough to convince Anglo’s own investors convince the company to enter into discussions.

Still, BHP is reluctant to bid against itself in a vacuum, and walking away remains a strong possibility. The company currently has no plans to respond hostilely to an offer to Anglo shareholders if the board refuses to accept it.

Spokespeople for BHP and Anglo declined to comment.

BHP CEO Mike Henry is trying to get his hands on Anglo’s copper assets, which are the envy of the industry, but wants Anglo to spin off its South African platinum and iron ore businesses before making a takeover. The acquisition would be the industry’s largest deal in more than a decade and would create the world’s largest copper producer – accounting for roughly 10% of global supply – at a time when mining companies and their investors are positioning themselves to take advantage of a looming supply shortage.

The looming deadline follows a week of drama, in which BHP revealed it had been rejected for a second time after increasing the number of shares it offered for the rest of Anglo. A day later, Anglo CEO Duncan Wanblad unveiled his own plan to overhaul its business by abandoning platinum, diamonds and coal and delaying an unpopular fertilizer project.

BHP has been heartened by Anglo’s announcement given the similarities to its own plan – particularly the proposal to spin off the platinum business – and the company is now considering how it could engage Anglo shareholders in the fight to acquire the smaller to pressure miners to start discussions.

Technically, Anglo could ask for an extension of the deadline, but as things stand the company has no plans to do that, people familiar with the matter say.

And while some shareholders have supported Anglo’s plan this week, its two largest shareholders, BlackRock Inc. and the South African Public Investment Corp., have not yet expressed a public position on which approach they would prefer. The pair will play a crucial role and together control around 18% of Anglo’s shares.

Meanwhile, activist Elliott Investment Management has also built a stake in Anglo and is currently assessing its options, another person said.

Speaking privately, several other major Anglo shareholders said they were unconvinced by BHP’s latest proposal. They also pointed to a lack of urgency, saying Anglo’s plan to slim down itself and focus on copper increases the likelihood that BHP or one of its rivals will target a takeover of the company in the future if the current attempt fails.

However, BHP’s own shareholders may be skeptical if a restructured Anglo demands a better valuation.

“The problem is that if they remove that risk, if they come back in a year, they have to pay a higher premium of 30% on Anglo share prices in a year when the situation is better,” said Hugh Dive. Chief investment officer of Atlas Funds Management in Sydney, which owns BHP shares.

BHP’s current offer values ​​Anglo – including the majority stakes it owns in listed South African companies – at £29.45 per share. Anglo closed at £26,775 in London on Friday, suggesting investors are pricing in a lower chance of a deal, but still up about 27% from the day before BHP’s move was first reported by Bloomberg.

In conversations with five of Anglo’s top 20 shareholders, most said they believed Anglo’s plan has put the company on more secure footing, at least in terms of the immediate goal of fending off BHP’s current takeover attempt. Several people said they were particularly pleased to see the belt-tightening promised on the British fertilizer project.

If Anglo’s management can achieve its ambitious portfolio overhaul, shareholders agreed that its lean copper and iron ore operations will be a much more attractive target than the sprawling company today – something they believe will not be lost on Rio Tinto Group and Glencore Plc. . For now, however, most investors said that none of the visions for Anglo outlined so far by Henry or Wanblad are clearly superior, and that they could be convinced by either side.

BHP currently has no intention of taking its offer directly to Anglo investors in a hostile bid, several people said. Such a move would leave BHP unable to conduct due diligence on Anglo’s assets and would risk angering its own shareholders, who have demanded the company remain disciplined. It would also require it to make a bid for all of Anglo, including the parts that Anglo wants to divest as a condition of a deal.

That means BHP needs Anglo to participate and agree to talks. But the clock is running.

(Reporting by Thomas Biesheuvel, Dinesh Nair, William Clowes and Paul-Alain Hunt).

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