BHP’s recent attempts to acquire Anglo American have left investors and analysts perplexed, particularly as the mining giant faces increasing pressure to secure growth. Over the weekend, BHP announced a new bid to purchase its smaller rival, a move that could have positioned the combined entity as the world’s leading producer of copper, boasting a market capitalisation of $170 billion. However, just days later, the Anglo board rejected the proposal, prompting widespread surprise among market experts.
Andy Forster, a fund manager at Argo Investments and a BHP shareholder, expressed his astonishment at the swift nature of the bid and its rejection, especially given the share price trajectories of both companies since BHP’s earlier offers in April and May 2024. He noted, “Everyone is saying they’re staggered and confused,” reflecting the sentiments of many in the industry.
Analysts opine that the offer likely lacked sufficient financial appeal to resonate with Anglo’s board. The bid from BHP would have interrupted Anglo’s ongoing discussions about a proposed merger with Canada’s Teck Resources, which is poised for a shareholder vote on December 9. This adds further complexity to the situation, as the timing of BHP’s approach coincided with executives from both companies attending the same event in South Africa.
While BHP has not disclosed the financial details of its latest offer, sources familiar with the discussions revealed it was structured as a cash-and-shares deal, valuing Anglo’s shares between £30 to £35 each—indicating a premium of 11% to 30% over its undisturbed share price of £27. Notably, this offer fell short of the valuation at which Anglo’s investors had indicated they might entertain a deal.
The simplicity of this latest proposition—contrasting with BHP’s previous £39 billion bid that included a convoluted asset divestment requirement—was highlighted as a potential advantage. Analysts noted the appeal of Anglo’s copper assets in the current market, particularly following significant restructuring efforts by the company over the past year.
As Anglo’s board convened to consider the bid, they informed their intended partner Teck about the approach. However, the situation intensified when a news leak on Sunday prompted BHP to accelerate its timeline. Later that day, Anglo promptly declined the offer, leading BHP to announce its withdrawal from the negotiation.
In their statement, BHP maintained that a merger with Anglo would have yielded considerable strategic benefits and value for stakeholders, but underscored confidence in their organic growth strategy. Industry experts speculated that had BHP employed a more straightforward approach earlier, such as 18 months prior, the acquisition could have succeeded. Comments from portfolio manager George Cheveley reflected this sentiment, as he suggested that a more direct cash offer at that time might have made the deal feasible.
For BHP’s CEO, Mike Henry, who is anticipated to step down next year, these failed attempts highlight the pressures faced by the company in boosting its copper production. With BHP investing over $10 billion into upgrades at its Escondida copper mine in Chile, the need for immediate growth remains critical, particularly as these enhancements will not come online until 2032.
Despite recent acquisitions, including a $64 billion purchase of Oz Minerals and a $2 billion investment in the Argentine copper miner Filo, the repeated rejections from Anglo underline the challenges BHP faces in pursuing a favourable acquisition strategy. Analysts like Tom Price point out that this latest rejection marks BHP’s fourth failed attempt to secure a merger, raising concerns about the scarcity of targets that align with BHP’s growth ambitions.
