Thrice-thwarted BHP throws in the towel on Anglo bid, capping a month of high drama

29 May 2024

Thwarted thrice by Anglo American in what ended up as a $49bn all-share bid for the rival mining group, BHP said on Wednesday it would not make a revised firm offer after the target declined to extend the ‘put up or shut up’ deadline. BHP had added some dessert items to its offering without changing the price and structure on the menu.

The dust has settled on the autumn veld, and Anglo American remains standing over it — for now.

Capping a month of high drama in the global and South African mining industry, BHP said on Wednesday — as South Africans were still going to the polls — that it would not make a fourth offer for Anglo after the target declined to extend the deadline for such a proposal.

“BHP will not be making a firm offer for Anglo American,” BHP CEO Mike Henry was quoted as saying in a statement issued shortly before the deadline at 5pm London time on Wednesday.

This ended a saga that could have seen BHP, the world’s largest miner, acquire Anglo, which has had an outsized role in South African history for the past century plus some change.

BHP had raised its initial offer by increments, only to be rebuffed by the Anglo board each time, partly on the grounds that the structure of the proposed deal was complicated — music to the ears of lawyers and consultants, but perhaps not a chord that would appeal to all shareholders.

The BHP proposal included as a pre-condition that Anglo hive off most of its South African assets, meaning Anglo American Platinum (Amplats) and Kumba Iron Ore (Kumba), with diamond producer De Beers to be subjected to a review — corporate-speak for probably eventually dumping it as well.

BHP maintained that its proposal was not a slight on South Africa’s mining investment environment — which is widely regarded as fraught with risk — and that it was all about the portfolio.

Ultimately, and in fairness to BHP on this front, this was about Anglo’s lucrative copper assets in South America, which are coveted because of the old metal’s new applications in the green energy transition.

As the heavy metal band Metallica would say, “Nothing else matters.”

Anglo itself subsequently rushed out its plans to unbundle Amplats and ditch De Beers, which could be taken as a sign that for it, nothing else beyond copper, Kumba and its fertiliser project in the UK matters. Its wine farm in the Western Cape doesn’t count, though it presumably remains a liquid asset.

Risk perception

But adding to the risk perception around South African mining, Minerals and Energy Minister Gwede Mantashe voiced his opposition to the deal more than once.

The Public Investment Corporation (PIC), which holds stakes in both companies, stuck its oar into the waters, making difficult demands such as “future and perpetual participation by South African shareholders in the acquired assets through the JSE”.

Read more in Daily Maverick: Round three — Anglo prepared to talk after rebuffing BHP’s third $49-bn offer

BHP was aware of this political context and added some dessert items to its offering while leaving the price and structure unchanged on the menu.

The additional sweets included BHP “sharing in the costs of increased South African employee ownership of the listed South African businesses … [and] … establishing a Mining Centre of Excellence to support R&D, training and promotion of South Africa as a premier mining destination”.

This was not enough to move the needle for Anglo, which had signalled after the third offer that it was open to talks — a sign of some pressure from shareholders. Presumably, they wanted something else.

Into this froth, the Church of England Pensions Board — which is a shareholder in Anglo, and has exerted pressure on the company in the past to dump its coal assets — sang from its hymn sheet on the issue.

“The Church of England Pensions Board ... welcomes the Anglo Board’s decision to reject the extension of talks with BHP. We continue to view this proposed takeover as unfavourable to the long-term interests of our pension fund members,” it said.

It is unlikely that the Anglicans put the fear of God into BHP, but some may see Anglo’s future as depending on divine intervention as companies such as Glencore are seen as potential suitors to once again try to tempt the Anglo faithful.

Bad blood

There is also a lot of bad blood that has been spilt on the veld, even if the hunter did not take down the hunted.

“We were unable to reach agreement with Anglo American on our specific views in respect of South African regulatory risk and cost and, despite seeking to engage constructively and numerous requests, we were not able to access from Anglo American key information required to formulate measures to address the excess risk they perceive,” BHP’s Henry was quoted as saying on Wednesday.

That is a relatively polite way of saying that in BHP’s view, Anglo did not give a full view of the target.

Anglo, for its part, accused BHP of wrapping its moves in camouflage despite what it described as “extensive engagement with BHP and its advisers, with a particular focus on the proposed structure and associated execution and value risks for Anglo American’s shareholders.

“Throughout the engagements ... BHP continues to restate its belief that the risks of its complex structure are not material, yet has repeatedly and consistently stated both publicly and during the engagements that it is unwilling to amend its proposed structure to assume these risks.”

BHP may have given up the game for now, but the hunt for Anglo’s copper assets may lead to another stalk. DM

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