Australian mining group BHP has launched a R650bn takeover bid for SA’s 107-year-old one-time global giant Anglo American – a company now worth just a quarter of BHP’s value.
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By Dinesh Nair, Thomas Biesheuvel and Crystal Tse
The world’s largest mining company, BHP Group Ltd., has made a takeover approach for rival Anglo American Plc, a move that could spark the biggest shakeup in the industry in over a decade.
Read more: BHP’s ‘unbundle’ demands on bid for Anglo is an indictment on SA economy – Piet Viljoen
Anglo American, which has a market value of £27 billion ($34 billion), said late Wednesday that it had received an unsolicited all-share merger proposal, after Bloomberg reported that BHP was considering a potential offer. It added BHP’s move was conditional on Anglo first splitting off its South African platinum and iron ore units.
If successful, the transaction would mark a return to large-scale dealmaking for BHP, which has revived its appetite for transformational acquisitions in the past couple of years under Chief Executive Officer Mike Henry. A tie-up with Anglo would create the world’s biggest copper miner ahead of wave of demand from new-energy sectors, and BHP’s move could flush out other suitors aiming to boost their output.
“If BHP does indeed continue to pursue this deal, we would be surprised if other bidders do not emerge,” analysts from Jefferies LLC led by Christopher LaFemina said in an emailed note. A bid that values Anglo at $42.6 billion — a 28% premium based on its latest share price — might get a deal “across the finish line,” they said.
Over the last year, Anglo’s shares have underperformed rivals including its heavyweight Anglo-Australian suitor. BHP, which trades in London and Sydney, has a market value of about $149 billion.
Anglo American has long been viewed as a potential target among the largest miners, particularly because it owns big South American copper operations at a time when most of the industry is eager to add reserves and production. However, suitors have been put off by its complicated structure and mix of commodities, and especially its deep exposure to South Africa.
BHP produced about 1.2 million tons of copper in 2023 on an equity basis, while Anglo’s output was 826,000 tons. That would give the combined group roughly a 10% share of global mine supply. Jefferies said antitrust issues “would likely be a problem” for the deal since governments consider copper a strategic mineral.
Anglo has faced a series of major setbacks over the past year as prices for some of its key products plunged, while operational difficulties have forced the company to slash its production targets — driving down its valuation and leaving the company vulnerable to potential bidders.
It said in its statement that its board was reviewing the proposal and there was no certainty an offer would be made.
Big Deals
A successful takeover would represent the first mega deal among the world’s biggest diversified miners in over a decade. BHP and its biggest rivals spent years on the sidelines after a series of disastrous transactions, but have warmed up to the prospect of dealmaking after reassuring investors that they have learned from past mistakes.
“We would need to see the price BHP had in mind in order to form a better view,” Adrian Prendergast, senior analyst at Morgans Financial Ltd. said in an emailed note. A takeover of Anglo would be “material but not transformative” for BHP given the size of the target, he said.
BHP last year bought copper producer OZ Minerals Ltd. for about $6.4 billion in its first major purchase in years, but has otherwise focused until now on selling assets such as oil, gas and coal.
The clear lure here would be Anglo’s South American copper business, long eyed by bigger players in the industry — even though it has recently faced setbacks and has had to reduce its copper production forecasts.
It’s also possible that the proposal for Anglo could now prompt others to make a move. No. 2 miner Rio Tinto Group has also been investing in copper production, while Glencore Plc last year made an unsuccessful offer for Teck Resources Ltd., which has a coveted copper business, before eventually reaching a deal for the Canadian company’s coal assets.
Anglo’s valuation may make it more attractive, but it remains a highly complicated business. The company owns majority stakes in two South African-listed miners — Anglo American Platinum Ltd. and Kumba Iron ore Ltd. — and is the majority owner of diamond miner De Beers. It also has a long and complicated relationship with South Africa, where the state pension fund manager is its biggest shareholder.
BHP’s proposal was to first hand Anglo’s stakes in the two South African businesses to the smaller company’s investors before proceeding with a takeover, Anglo said. The two parts of the proposal would be “interconditional,” it said.
Anglo’s other operations include copper, nickel, steelmaking coal and Brazilian iron ore, as well as the iconic De Beers business.
Both companies are also investing in new fertilizer businesses — BHP is building a massive potash mine in Canada, while Anglo is developing a polyhalite mine on the east coast of England.
© 2024 Bloomberg L.P.
Reuters: BHP’s proposed bid for Anglo American is a big bet on copper
SOURCE: REUTERS
By Siyi Liu and Mai Nguyen
BEIJING/HANOI, April 25 (Reuters) – BHP Group’s proposed $39 billion buyout of Anglo American is a big bet on copper that could spark a scramble for mining assets as a bullish demand outlook and tight supply for a mineral crucial to the energy transition sends prices to multi-year highs.
Combined, the companies would churn out 10% of global output of the red metal, cementing diversified miner BHP’s position as the top producer ahead of copper-focused Codelco and Freeport-McMoRan.
Thanks to its high conductivity and extreme resistance to corrosion, the metal is used in everything from cars, power grids to building construction.
“The energy transition is only just getting started, and if electricity is the lifeblood of this revolution, copper is the veins and arteries,” said Peter Arkell, chairman of the Global Mining Association of China (GMAC).
“There is no way that existing mines can meet the anticipated demand, therefore the major mining companies recognise that copper needs to be a fundamental part of their portfolio,” he told Reuters.
Global refined copper consumption grew 6.7% in 2023 to 27.63 million metric tons, World Bureau of Metal Statistics data showed.
Global refined copper demand will rise at a compound annual growth rate of 2.3% from now through 2028, according to London-based commodity research firm CRU.
That robust demand outlook is coupled with unexpectedly tight supply of copper concentrate this year, fuelled by the December closure of First Quantum Minerals’ massive Cobre Panama mine.
Also in December, Anglo American cut its copper production guidance by up to 210,000 tons for 2024 and as much as 180,000 tons for 2025, citing lower grades and ore hardness at the Los Bronces mine in Chile, pushing analysts to revise their market balance forecasts.
CRU predicts a shortage of 194,000 tons for global copper concentrate and a shortage of 149,000 tons for refined copper this year, and analysts have said they expect the concentrate deficit to widen over the next three years.
Goldman Sachs is even more bullish, with the investment bank’s analysts forecasting a shortage of 428,000 tons of refined copper in 2024 in a note on Thursday that also predicted prices would hit $12,000 per ton over the coming year.
That would be another 23% rise from current levels on the London Metal Exchange (LME), where the price has rallied on strong longer-term market fundamentals and speculative trading.
The LME’s benchmark three-month copper contract hit a two-year high of $9,988 per metric ton on Monday, up 15% so far this year, while the most-traded contract on the Shanghai Futures Exchange hit a record 81,050 yuan ($11,184.25) a ton on Monday, up 18% year-to-date.
MORE DEALS?
Craig Lang, an analyst at CRU, said some miners are struggling to maintain production levels as mines age, which would encourage them to acquire other assets. Smelters are also likely buy stakes in mines in order to secure offtake, he added.
BHP said in a statement on Thursday that purchasing Anglo would give it value-adding copper growth options.
“BHP has talked about getting more copper for a long time,” said Hayden Bairstow, head of research at Australian broker Argonaut. “Anglo’s got plans to go to a million tonnes per year in the next 10 years.”
Miners and smelters in China, the world’s top refined copper producer as well as the biggest importer of raw materials, have also been looking for mining assets to secure supply.
China’s Zijin Mining, which produced more than 1 million tons of mined copper in 2023, ranking sixth globally, last year joined with South Africa’s Sibanye Stillwater in an attempt to buy Zambia’s Mopani Copper Mines, but lost out to a unit of the United Arab Emirates’ International Holdings Company.
China’s CMOC Group said in February that it could buy more assets in the copper and cobalt-rich Democratic Republic of Congo, and sees further potential for growth in South America and Indonesia.
China Copper, owned by state-run Aluminum Corp of China (Chalco), said in March it was looking for tie-ups globally to acquire assets.
GMAC’s Arkell said the long-term planning and investment needed for mining means producers needed to both explore and buy.
“As the major mining companies search for the next significant deposit, they must look to acquisitions to remain a major producer meeting near term demand,” he said.
($1 = 7.2468 yuan)
(Reporting by Siyi Liu in Beijing, Mai Nguyen in Hanoi and Melanie Burton in Melbourne; Editing by Tony Munroe and Jamie Freed)
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