BHP’s sweeteners spark talks for £39bn Anglo American merger: Chris Hughes

Mike Henry, CEO of BHP Group Ltd., is leveraging incremental sweeteners to entice Anglo American Plc into a potential £39 billion ($50 billion) merger. His strategy involves Anglo splitting off two South African miners, offering Anglo shareholders a substantial premium in BHP stock. While Anglo remains hesitant due to complexities and undervaluation concerns, it's engaging in talks, signalling the potential for a revised, more lucrative deal..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here..By Chris Hughes.Sometimes the old ways are the best. Mike Henry's method of adding incremental sweeteners to a lowball starting proposal to buy Anglo American Plc won't win any awards for originality in mergers and acquisitions. .___STEADY_PAYWALL___.Read more: Anglo American seeks partners for fertiliser project amid company restructuring.Henry's latest proposal once again requires Anglo to stage a mini-breakup before merging what's left of the company with BHP. Anglo would first hand its shareholders majority stakes in two South African miners it currently owns. Then its investors would swap their Anglo shares for BHP stock at a premium. On the revised version of this idea, Anglo shareholders would just get more BHP stock..BHP values the pitch at £31.11 per Anglo share, based on its recent share price and that of the stakes to be carved out. That's a 41% premium to where Anglo shares closed on April 24 before Bloomberg News reported BHP's ambitions. A decline in the suitor's stock on Wednesday afternoon has already dragged the putative value on offer lower — but it's still a serious price. .Anglo has dismissed this while also simultaneously granting time for talks. The language of the rejection is in some ways like its previous rebuttals: BHP's requirement that Anglo shrinks prior to a takeover adds complexity and delay. That makes it hard to know precisely what value Anglo shareholders might receive once any deal completes. But there's one big shift. Anglo is — rightly — no longer saying BHP's proposal significantly undervalues the business..Engaging with BHP, despite the absence of what Anglo deems an acceptable offer, makes sense for the target. BHP is in the ballpark; a proposal around this price without the do-the-splits condition would have been extremely hard to swat away. And Anglo's new strategy, laid out last week, already includes the separation of Anglo American Platinum Ltd., one of the two listed stakes that BHP itself wants jettisoned. The objections around complexity and uncertainty can be met with a further improvement on price — either by adding cash or more stock. And the riskiness could be reduced by making a transaction conditional on carving out just the platinum business, consistent with Anglo's own strategy..BHP has been mischievous in labeling the share ratio for its pitch "final." The fact is it can amend that if doing so would see Anglo recommend a transaction, or if a counterbidder surfaced..Anglo could, of course, have been much more definitive and shut the door completely. To stay in the game, BHP would then have had to make a hostile offer that, under the UK Takeover Code, would have had to come today. Doing so would have meant bidding for all of Anglo with no fiddly breakup plan — something BHP is clearly loath to do..Nevertheless, Anglo hasn't lost all its negotiating power by keeping BHP's dreams alive. BHP needs an Anglo board recommendation for the two-stage transaction it so covets to succeed. Anglo can extract a higher price for giving its assent — its duty to its shareholders means that must now be its singular job..Read also:.BHP faces deadline for potential $43bn Anglo American takeover bidInvestors predict BHP will raise offer for Anglo American after rejectionAnglo American in a race against time amid BHP takeover bid.© 2024 Bloomberg L.P.

BHP’s sweeteners spark talks for £39bn Anglo American merger: Chris Hughes

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