Update: Anglo American rejects £31bn BHP offer, saying it significantly undervalues the firm

ANGLO AMERICAN has rejected a £31bn (US$38.7bn) takeover offer from its mining rival BHP, saying it “significantly undervalues” the firm.

The rejection comes just a day after BHP’s non-binding bid was made public. BHP is trying to take a larger position in what it calls “future facing commodities” by taking over the copper and potash mines that Anglo American operates. In its announcement, it sold the deal to Anglo American shareholders as offering a significant premium on the value of the company.

Anglo American’s board said the offer is opportunistic and described the proposed restructure, which includes the prospect of selling off its platinum and South African iron ore business, as highly unattractive. It urged shareholders to take no action.    

Stuart Chambers, chairman of Anglo American, said: “Anglo American is well positioned to create significant value from its portfolio of high-quality assets that are well aligned with the energy transition and other major demand trends. With copper representing 30% of Anglo American's total production…the board believes that Anglo American’s shareholders stand to benefit from what we expect to be significant value appreciation as the full impact of those trends materialises.”

BHP has declined to comment on the rejection.

The business media is reporting that the rejection could spark a hostile takeover battle and that other mining rivals including Glencore and Rio Tinto might now be tempted to make rival bids.

25/4/24: BHP makes £31bn bid for mining rival Anglo American

BHP HAS made an unsolicited £31bn (US$38.7bn) offer for Anglo American which, if agreed, would merge two of mining’s largest firms to create the world’s leading producer of copper.

Demand for copper is expected to rise from 28.3m t in 2020 to 40.9m t in 2040, driven by the push to replace fossil fuels by electrifying energy generation and transport. The price of the metal has also been on a steady rise since the start of the year, reaching an 11-month high last month following reports that Chinese smelters would cut production at loss-making plants.

Both companies produce the majority of their copper out of huge mines in Chile, though BHP’s global output of the metal at 1.8m t in 2023 was more than double that of its rival.

Christopher LaFemina, an analyst at Jeffries, said the merger would be a good strategic fit for BHP though thinks that some of Anglo American’s assets might be undervalued. LaFemina said he would be “surprised if this is BHP’s final offer as the price is clearly too low to succeed”.

Anglo American released a statement earlier today saying that the board is reviewing the non-binding proposal, noting that BHP has until 22 May to make a formal bid. BHP’s proposal includes selling off Anglo American’s platinum business and Kumba Iron Ore which supplies the steel industry in South Africa.

Aside from copper, both have large interests in iron ore (BHP’s output was 257m t in 2023 compared to Anglo’s 60m t); coal (BHP’s 29m t vs Anglo’s 16m t) and nickel (BHP’s 80,000 t vs Anglo’s 40,000 t). Both also have interest in fertilisers, with BHP building a large potash mine in Canada and Anglo American developing a polyhalite mine in northeast England.

BHP said in a statement that the benefit of the bid to shareholders includes increased exposure to copper through Anglo American’s world-class copper assets, while it would complement BHP's iron ore and metallurgical coal portfolios with Anglo American's iron ore operations in Brazil and metallurgical coal assets in Queensland, Australia.

Anglo American also produces platinum group metals which are used in catalysts and owns the De Beers diamond company, though BHP has said the iconic business would be subject to a strategic review once the deal is completed, hinting at a sale.