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Metals markets recently saw UK metal and mining multinational Anglo American reject a £31.1 billion ($38.8 billion) takeover bid from Australia’s BHP. Meanwhile, shareholders in the latter company continue to urge an increase in the offer price.
On April 26, London- and Johannesburg-listed Anglo American’s board of directors unanimously rejected BHP’s unsolicited, all-share offer made the previous day. Under the offer, Anglo American would demerge all its shareholdings in Anglo American Platinum Limited and Kumba Iron Ore Limited in South Africa. Anglo American also stated that the offers and the demergers would be inter-conditional.
Anglo American Board Deems Proposal ‘Highly Unattractive'”
“The board has considered the proposal with its advisers and concluded that the proposal significantly undervalues Anglo American and its future prospects,” Anglo said on April 26. “In addition, the proposal contemplates a structure which the board believes is highly unattractive for Anglo American’s shareholders, given the uncertainty and complexity inherent in the proposal and significant execution risks,” the group added.
In their statement, Anglo American noted that copper comprises up to 30% of its portfolio. “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 materializes,” the company noted.
Insiders From Metals Markets Feel the Buy Was All About Copper
In terms of metals markets, copper’s three-month closing price on the London Metal Exchange reached a record-high of $10,135.50 per metric tonne on April 29. This represents an increase of almost 25% from the low of $8,169 seen on February 9. One analyst was unsurprised that BHP would need to raise its offer and noted that this normally occurs in mergers and acquisitions.
The source also believes that the Australian company was eyeing Anglo American for its copper assets, and that acquiring them would make BHP the world’s largest single producer of copper, at about 10% of the global total. “Copper is already tight. No one is building any new mines,” that source noted.
“It is also less expensive to acquire active copper mines, rather than to develop a new one,” the source added. That fact, plus expectations of higher demand, continues to push up copper prices. Besides the refusal by Anglo American’s board, the source warned that other difficulties could lie in the reaction by the South African and Chilean governments.
By Christopher Rivituso
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