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BHP has proposed buying rival Anglo American in a £31bn deal that provoked a backlash from the South African government and leading shareholders.
Australia-based BHP said on Thursday that it had made an all-stock proposal to acquire Anglo and become the world’s biggest producer of copper, a metal critical for the world’s efforts to decarbonise.
The unsolicited approach sent shockwaves through the global mining sector, stoking the prospect of a bidding war.
South Africa’s minerals resources minister Gwede Mantashe told the Financial Times that he opposed the bid because his country’s experience with BHP was “not positive”, though he said this was not an official government position.
London-listed Anglo has been woven into the fabric of the South African economy since Ernest Oppenheimer founded the company in 1917 in Johannesburg. BHP in 2001 merged with South African miner Billiton and a South African state-owned entity, Public Investment Corporation, is Anglo’s biggest shareholder.
Mantashe, a close ally of President Cyril Ramaphosa, said the transaction that created BHP Billiton “never did much for South Africa” and led to capital leaving the country.
PIC said “any transaction presented will be assessed to ensure value creation for our clients” but noted that mining “remains a critical part of the South African economy” and “new opportunities that may arise in the sector need to take these factors and long-term sustainability into account”.
Under the proposal, Anglo investors would receive 0.7097 BHP shares for each share. BHP said it would not take Anglo’s South African iron ore and platinum divisions, which are independently listed. Shares in those units fell on Thursday.
BHP said its offer valued each Anglo share at £25.08. Anglo shares surged 16.1 per cent to £25.60 in London, giving the company a market capitalisation of £34.2bn.
Some of Anglo’s largest shareholders criticised the bid, which came after a period of weak share price performance.
Nick Stansbury at Legal & General Investment Management, Anglo’s 11th-largest shareholder, said BHP had made a “highly opportunistic approach” that was capitalised on Anglo’s “depressed” valuation and represented “an unattractive proposition for long-term investors”.
Iain Pyle, a fund manager at Abrdn, a top-25 shareholder, said: “The offer price has the feel of an initial bid which you hope would be revised higher.”
Adrian Frost, an investment manager at Artemis Fund Managers, a top-20 shareholder, said the bid price was “way off”. He added: “If I was a BHP shareholder and I was still capable of doing a cartwheel I’d do two if I got it at this price.”
One top-15 shareholder said that, at the current offer price, a proposed takeover had implications for the wider UK stock market.
“If we don’t put a stop to this we will continue to see other poorly valued UK companies taken over by their more richly valued foreign competitors. There will be a continued drip, drip, drip of value out of the UK market.”
The value of Anglo’s prized copper mines in Chile and Peru is obscured by the rest of its sprawling business, analysts say.
“The copper is the real thing here — the copper is first-class,” said Frost at Artemis. “If you believe in the structural growth of copper, the offer price is too low.”
A fourth big investor, who holds shares in both Anglo and BHP, said Anglo would need to push for a higher price from BHP or offer up another proposal that could involve selling assets and combining with similar-sized industry peers such as Teck Resources, Freeport-McMoRan or South32.
“Anglo will need to create a compelling alternative if they’re going to defend this,” they said.
Anglo has sounded out potential buyers of its De Beers diamond business, including Gulf sovereign wealth funds, luxury houses and wealthy individuals in recent weeks, according to two people familiar with the matter.
