BHP: Increased and final offer ratio for Anglo American

Issued on behalf of BHP Group Ltd

BHP Group Ltd (BHP) notes the announcement by Anglo American plc (Anglo American) regarding the extension of the deadline for a BHP proposal (the Extension Announcement).

As stated in Anglo American's announcement of 24 April 2024, BHP was required to either announce a firm intention to make an offer for Anglo American or announce that it does not intend to make an offer by 5.00 p.m. (BST) on 22 May 2024. As set out in the Extension Announcement, the Board of Anglo American requested an extension of the deadline under Rule 2.6(c) of the UK Code with the consent of the UK Panel on Takeovers and Mergers (the Takeover Panel).

BHP confirms that on 20 May 2024 it submitted an increased and final offer ratio to the Board of Directors of Anglo American as part of its proposal for a potential combination with Anglo American to be effected by way of a scheme of arrangement. In putting forward the Final¹ Offer Ratio (as defined below), BHP has been guided by its capital allocation framework and its view of the fundamental value of Anglo American and BHP.

The revised proposal follows BHP's initial proposal which was submitted to the Board of Anglo on 16 April 2024 (Initial Proposal) and BHP's second proposal which was submitted to the Board of Anglo on 7 May 2024 (Second Proposal).

The transaction structure of the revised proposal remains the same as BHP's previous proposals and comprises an all-share offer for Anglo American subject to the pro-rata distribution by Anglo American of its entire shareholdings in Anglo American Platinum Ltd (Anglo Platinum) and Kumba Iron Ore Ltd (Kumba) to Anglo American shareholders immediately before completion of the scheme of arrangement. Since the submission of the revised proposal, we have been engaging with Anglo American and its advisors to help mitigate the concerns associated with the implementation of this structure that led to the rejection of the revised proposal. We have made progress on these topics over the course of the engagement so far, and we are hopeful that resolution will be reached in the next seven days.

Under the extended deadline, BHP must either announce a firm intention to make an offer for Anglo American in accordance with Rule 2.7 of the UK Code or announce that it does not intend to make an offer for Anglo American, in which case the announcement will be treated as a statement to which Rule 2.8 of the UK Code applies, by no later than 5.00 p.m. (BST) on 29 May 2024 (the Revised Deadline). The Revised Deadline can be extended with the consent of the Panel in accordance with Rule 2.6(c) of the UK Code.

Structure of the proposal

Under the terms of the revised proposal, ordinary shareholders of Anglo American would receive:

• 0.8860 BHP shares for each ordinary share they own in Anglo American (BHP Share Consideration), which represents Anglo American shareholders owning, in aggregate, approximately 17.8% of the combined BHP and Anglo American group on completion of the potential combination (the Final¹ Offer Ratio); and
• ordinary shares in Anglo Platinum and Kumba (which would be distributed by Anglo American to its shareholders in direct proportion to each shareholder's effective interest in Anglo Platinum and Kumba).

The Final Offer Ratio represents a total value of £31.11 per Anglo American share based on the closing share prices of BHP as at 22 May 2024 and Anglo Platinum and Kumba as at 21 May 2024.

The Final Offer Ratio will not be increased, except that BHP reserves the right to increase and/or otherwise improve the Final Offer Ratio if (i) there is an announcement on or after the date of this announcement of an offer or possible offer (including a partial offer) for Anglo American by a third party offeror(s) or potential offeror(s) (whether identified or not), (ii) the Board of Anglo American announces that it recommends or is minded to recommend an offer on better terms than the Final Offer Ratio or (iii) the Takeover Panel otherwise provides its consent.

The combined group would have a leading portfolio of large, low-cost, long-life Tier 1 assets focused on iron ore and metallurgical coal and future facing commodities, including potash and copper. Anglo American's other high quality businesses, including its diamond business, would be subject to a strategic review post completion.

BHP is committed to a combination that leverages the best of both BHP and Anglo American and intends to offer Anglo American up to two positions on the Board of the combined entity. 

BHP will work closely and constructively with competition regulators and provide the information they need to assess the potential transaction. BHP is confident that it can obtain all required regulatory approvals and consummate a transaction that benefits customers globally.

The revised proposal is non-binding and subject to customary conditions including completion of due diligence to the satisfaction of BHP. Anglo American has been offered reciprocal due diligence on BHP.

Mike Henry, BHP Chief Executive Officer said:

"BHP has put forward a final offer ratio of 0.8860 BHP shares for each Anglo American share. This is a significant increase from our first proposal and would provide Anglo American shareholders with 17.8% of a combined BHP and Anglo American.

The revised proposal is underpinned by BHP's disciplined approach to mergers and acquisition and our focus on delivering long term fundamental value.

BHP's revised proposal will offer immediate value for Anglo American shareholders and allow them to benefit from the long-term value generation of the combined group.

BHP looks forward to engaging with the Board of Anglo American to explore this unique and compelling opportunity to bring together two highly complementary, world class businesses."

Value of the proposal

The terms of the proposal represent a total value, based on spot share prices and FX rates⁶ as at 22 May 2024 for BHP and 21 May 2024 for Anglo Platinum and Kumba, of approximately £31.11 per Anglo American ordinary share including £5.40 in Anglo Platinum shares, £4.23 in Kumba shares and £21.48 per share for Anglo American's unlisted assets, valuing Anglo American's share capital at approximately £38.6 billion, and implying a:

• 47% premium on the aggregate £ value per Anglo American ordinary share over the undisturbed Anglo American share price (£21.11 as at 23 April 2024, being the last trading day before the press speculation about the Initial Proposal);
• premium on the undisturbed market value of Anglo American's unlisted assets of approximately 67% (in £ per share, as at 23 April 2024);
• premium on the undisturbed market value of Anglo American's unlisted assets³ of approximately 127% based on the volume weighted average closing price of Anglo American's shares (adjusted for the attributable volume weighted average closing prices of Anglo Platinum and Kumba) in the 90 trading days prior to and including 23 April 2024; and
• 56% premium to the broker median net asset value⁴ of Anglo American's unlisted assets.

The revised proposal represents an increase in the spot aggregate £ value per Anglo American ordinary share over the Second Proposal (as announced on 13 May 2024) of 11.3%. The terms of the revised proposal represent an increase over the Initial Proposal:

• of 24.8% in the merger exchange ratio⁵ and BHP Share Consideration; and
• 20.4% in Anglo American shareholders' aggregate ownership in the enlarged group (i.e. increasing from c. 14.8% to c.17.8%).

The increase in the Final Offer Ratio reflects additional value from Anglo American's restructuring proposal and cost plans. BHP believes that the Final Offer Ratio represents a compelling opportunity for long term fundamental value-creation for both Anglo American and BHP shareholders.

UK Takeover Code

Pursuant to Rule 2.5 of the Code, BHP reserves the right:

•  to make an offer on less favourable terms:
  • with the agreement or consent of the Anglo American Board; or
  • following the announcement by Anglo American of a Rule 9 waiver pursuant to the Code; or
  • if a third party announces a firm intention to make an offer for Anglo American at a lower price and/or on less favourable terms than contemplated under the terms of this proposed offer; or
  •  if the number of Anglo American shares to be acquired includes any shares held by Tarl Investment Holdings Limited, Epoch Investment Holdings Limited, and/or Epoch Two Investment Holdings (together the "Tarl and Epoch shares"), or any of the Tarl and Epoch shares result in the issue of additional BHP shares as consideration or in connection with the offer; and/or
•  to implement the proposed offer by means of a takeover offer as opposed to a scheme of arrangement.

If Anglo American announces, declares, makes, or pays any dividend or any other distribution or return of value to shareholders, Note 4 on Rule 2.5 of the Code applies.

This announcement does not amount to a firm intention to make an offer and there can be no certainty that an offer will be made. There is no certainty that any form of agreement or transaction will be reached or concluded. 

This announcement is being made by BHP without prior agreement or approval of Anglo American.

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Footnotes

• 1.   The Final Offer Ratio will not be increased, except that BHP reserves the right to increase and/or otherwise improve the Final Offer Ratio if (i) there is an announcement on or after the date of this announcement of an offer or possible offer (including a partial offer) for Anglo American by a third party offeror(s) or potential offeror(s) (whether identified or not), (ii) the Board of Anglo American announces that it recommends or is minded to recommend an offer on better terms than the Final Offer Ratio or (iii) the Takeover Panel otherwise provides its consent.
• 2.   This release was made outside of the hours of operation of the ASX markets announcement office.
• 3.   Anglo American's unlisted assets comprises the entirety of the value implied for Anglo American's assets and liabilities excluding its shareholdings in Anglo Platinum and Kumba based on Anglo American's closing price less the closing prices of Anglo Platinum and Kumba on 23 April 2024, being the last trading day prior to the press speculation about the Initial Proposal.
• 4.   Net asset value is based upon a median of the six brokers which disclose SOTP, including Anglo Platinum and Kumba, alongside latest reported Anglo Platinum and Kumba net cash balances as of 31 December 2023.
• 5.   Based on 0.8860 BHP shares for each ordinary share. The number of fully diluted Anglo American shares assumed excludes shares held by Tarl Investment Holdings Limited, Epoch Investment Holdings Limited, and Epoch Two Investment Holdings. These shares total 112,300,129 as per the Rule 2.9 announcement by Anglo American dated 25 April 2024.
• 6.   Based on spot FX rates as at 21 May 2024 (AUD:GBP 0.5243; ZAR:GBP 0.0435).