Australian resources giant BHP has launched a $60 billion power play for the lion’s share of energy transition supplies as the world electrifies.
Anglo American’s board has said the offer ‘'Significantly undervalues Anglo American and its future prospects.”
The market reacted to the news of the approach on Friday morning by dropping BHP’s Shares 4.6 percent to $43.14.
In Australia, London-based Anglo-American operates several major projects, including the Dawson coal mine and the Grosvenor coal mine in Queensland, as well as the Capcoal and Moranbah North coal mines. The company also has interests in the Moranbah South and Foxleigh coal mines and substantial mineral assets in South Africa.
BHP is a multinational mining, metals, and petroleum company headquartered in Melbourne and is one of the largest mining companies in the world. BHP is involved in the exploration, production, and processing of minerals, oil, and gas, with a focus on iron ore, copper, coal, and petroleum.
The company is in the process of expansion, highlighted by its 2023 $9.6 billion acquisition of OZ Minerals, and the latest offer is based on their desire to increase shareholders’ exposure to “future-facing commodities” by combining their and Anglo Americans’ substantial stake in the copper market.
Shortage of Copper
Copper is a much-in-demand resource as global energy requirements shift focus to long-term renewable solutions, and BHP chief executive Mike Henry warned in 2023 that there was not enough copper available to fully electrify the world’s economy.Copper’s combination of electrical conductivity, ductility, corrosion resistance, heat resistance, and malleability makes it an ideal material for use in electrical wiring, electric vehicle motors and transformers.
“A lack of new mined copper resources is a major obstacle for the energy transition and mining companies are facing growing resistance to building new mines, forcing them to merge to achieve growth,” Yongcheng Zhao, principal copper analyst at Benchmark, said.
Why Was the Offer Rejected?
The main sticking point hedges around the merger’s plan is that would require Anglo American to relinquish its platinum and iron ore interests in South Africa and complete two separate demergers of its entire shareholdings, namely those in Anglo American Platinum Limited and Kumba Iron Ore Limited.Anglo American’s Directors called the approach an “unsolicited, non-binding, and highly conditional combination proposal from BHP Group.”
However, after doing diligence on the proposal, the board “decided to reject it based on it being ‘highly unattractive’ ... [for] shareholders, given the uncertainty and complexity inherent in the proposal, and significant execution risks,” said the board’s statement.
Stuart Chambers, Chairman of Anglo American, commented that BHP’s proposal was “opportunistic and fails to value Anglo American’s prospects, while significantly diluting the relative value upside participation of Anglo American’s shareholders relative to BHP’s shareholders.”
“With copper representing 30 percent of Anglo American’s total production, and with the benefit of well-sequenced and value-accretive growth options in copper and other structurally attractive products, 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,” he said.
However, despite the rejection, analysts are reporting Anglo American may be pushed into accepting an improved offer from BHP as other rivals like Rio Tinto make their play on the acquisition.
BHP is understood to be consulting with their board and stakeholders in confidential discussions over upping their offer but declined to comment when approached by media.
