Anglo American extends the deadline for its takeover of BHP after rejecting an improved offer

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Anglo American has expanded talks with BHP over a takeover bid, keeping the prospect of the mining sector’s biggest ever deal alive even after the British-listed group rejected a £38.6 billion third approach.

BHP now has until 5pm UK time on May 29 to make a formal offer for its smaller rival, after increasing the number of shares on offer to Anglo investors in its third and “final” deal proposal.

Anglo will continue to work with BHP for another week, despite the company continuing to have “serious concerns” about the complex deal structure that requires it to spin off two South African units.

The extension keeps BHP’s hopes alive that it can still strike a deal that would transform the global mining industry and give the Australian company access to more copper, a metal essential to decarbonizing the economy.

BHP said in a separate statement on Wednesday that the third all-share offer valued Anglo at £31.11 per share based on the May 22 closing price and that this represented the “final offer ratio”.

The statement added that under UK takeover rules, the offer could be increased under certain conditions, such as if Anglo’s board agrees to recommend a higher offer, or a bid from a rival company for Anglo. However, BHP has no plans to improve the stock offering or change the structure of the deal, according to people familiar with the company’s plans.

Anglo’s board unanimously rejected the third proposal. Chairman Stuart Chambers said the offer “does not meet expectations of the value delivered to Anglo American shareholders” but that the board was “willing to continue to engage with BHP and its advisors on this matter”.

Ben Davis, a mining analyst at Liberum, said the late turn meant a deal was still possible but Anglo’s resistance to spinning off its South African operations first remained an issue. “Final offers are never final and the door is open, but it is difficult to see how we can make BHP’s proposed structure ‘safe’,” he said.

Line chart of share prices, again based in pence terms, showing Anglo's shares lagging behind rivals even after BHP's proposals

Anglo said the latest proposal valued its shares at £29.34, based on the closing price of its shares on April 23, before news of the merger talks became public. BHP’s previous offer valued Anglo at £27.53 per share, or £34 billion. Initially, the company had offered £25 per share, or £31 billion.

The deal would give Anglo shareholders 17.8 percent of BHP’s shares and represents a 47 percent premium on Anglo’s share price before news of the merger talks became public, BHP said.

Mike Henry, CEO of BHP, said the company “looks forward to working with the Anglo American board to explore this unique and attractive opportunity to bring together two highly complementary, world-class businesses”.

News of BHP’s improved offer came hours after the Public Investment Corporation, South Africa’s state investor and Anglo’s second-largest shareholder, said BHP needed to undertake a “meaningful review” of its offer.

Anglo said in a statement: “The board continues to believe there are serious concerns about the structure as it is likely to result in a material completion risk and value impact that will disproportionately burden Anglo American shareholders.”

Anglo last week unveiled its dramatic turnaround plans to split itself up by divesting its metallurgical coal, diamond and platinum divisions in a bid to oust BHP.

BHP’s proposal to split the two units has sparked controversy in South Africa during an election year as it was seen as a vote of no confidence by BHP in the country.

Anglo shares fell 0.2 percent to close at £26.81 in afternoon trading in London.

Anglo-American corporate structure updated

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