Unlock Editor’s Digest for free
Roula Khalaf, editor of the FT, picks her favorite stories in this weekly newsletter.
Anglo American has extended takeover bid talks with BHP, keeping alive the prospect of the biggest-ever deal in the mining sector, even after the UK-listed group rejected a third approach worth £38.6bn.
BHP now has until 5pm UK time on May 29 to submit a formal bid for its smaller rival after increasing the number of shares on offer to English investors in its third and “final” proposed deal.
Anglo will continue to work with BHP for the next week, despite saying it still has “serious concerns” about the complex structure of the deal, which requires the spin-off of the two South African units.
The extension keeps alive BHP’s hope that it can still secure a deal that would transform the global mining industry and give the Australian company access to more copper, a metal vital to decarbonisation.
BHP said in a separate statement on Wednesday that its third all-share offer valued Anglo at £31.11 per share based on the May 22 closing price and that this represented its “final offer ratio”.
The statement added that under UK takeover rules, the bid can be increased subject to certain conditions, such as Anglo’s management agreeing to recommend a higher bid or a rival company’s bid for Anglo. However, BHP does not intend to improve the share offer or change the structure of the deal, according to people familiar with the company’s plans.
The Anglo board of directors unanimously rejected the third proposal. Chairman Stuart Chambers said the offer “does not meet expectations on the value delivered to Anglo American’s shareholders” but that the board is “willing to continue to engage with BHP and its advisers on this matter”.
Ben Davis, a mining analyst at Liberum, said the late turnaround meant a deal was still possible, but that Anglo’s opposition to spinning off its South African business first remained an issue. “Final offers are never final and the door is left open, but it is hard to see how to ‘make safe’ BHP’s proposed structure,” he said.
Anglo said the latest proposal valued its shares at £29.34 based on its closing share price 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. It originally offered £25 per share, or £31 billion.
The deal would give Anglo shareholders a 17.8 percent stake in BHP and represents a 47 percent premium to Anglo’s share price before news of the merger talks became public, according to BHP.
BHP chief executive Mike Henry said the company “looks forward to working with the management of Anglo American to explore this unique and compelling opportunity to combine two highly complementary world-class businesses”.
News of BHP’s improved bid came hours after the Public Investment Corporation, South Africa’s state-owned investor that is Anglo’s second-largest shareholder, said BHP needed to make a “significant review” of its offer.
Anglo said in a statement: “Management continues to believe that there are serious concerns about the structure given that it is likely to result in significant termination risk and a value impact that falls disproportionately on Anglo American’s shareholders.”
Anglo last week revealed its dramatic U-turn plans to break up by spinning off its metallurgical coal, diamond and platinum divisions in a bid to fend off BHP.
BHP’s proposal to split the two units sparked controversy in South Africa during an election year as BHP was seen as a vote of no confidence in the country.
Shares in Anglo were down 0.2 percent at £26.81 in afternoon trading in London.
