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BHP (ASX: BHP) Eyes Anglo American with AU$75 Billion Takeover Proposal

Published 28/05/2024, 01:56 am
© Reuters BHP (ASX: BHP) Eyes Anglo American with AU$75 Billion Takeover Proposal
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The BHP Group Ltd (ASX: ASX:BHP) share price is showing strong performance today, continuing its upward trend. On Friday, shares closed at AU$44.64, and in Monday's trade, they increased to AU$45.18, marking a 1.22% rise. This compares favorably to the 0.82% gain of the S&P/ASX 200 Index (ASX: XJO) around the same time.

In contrast, Fortescue (ASX:FMG) Metals Group Ltd (ASX: FMG) and Rio Tinto Ltd (ASX: RIO) shares posted losses of 1.05% and 0.62%, respectively, despite a 0.8% rise in iron ore prices to USAU$120.40 per tonne. BHP’s strong performance is likely due to investor optimism surrounding its AU$75 billion takeover proposal for Anglo American (JO:AGLJ) (LSE: AAL).

Takeover Deadline Approaches

BHP's acquisition goals for UK-listed Anglo American have been a focal point in the market. The share price initially faced pressure following the announcement of the first takeover bid on 26 April. However, with global copper demand surging to record highs, BHP's interest in Anglo's high-quality copper assets has become a significant draw. Additionally, Anglo’s Queensland-based coal mines are part of the acquisition interest.

The complexity of the proposal, which includes divesting several of Anglo American’s assets such as South African iron ore, platinum businesses, and likely diamond projects, led to the rejection of BHP’s initial and second offers by Anglo’s board. The second offer, valued at around AU$64 billion, was dismissed on 14 May.

New Bid and Negotiation Timeline

BHP’s third bid, made on 23 May, values Anglo American at approximately AU$75 billion. This bid granted BHP a one-week extension under British legislation to negotiate with Anglo's board and make a binding offer, with the new deadline set for Wednesday, 29 May.

"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," stated BHP CEO Mike Henry. Despite this, the BHP share price closed down by 2.9% on the day of the statement.

Potential for Increased Offer

According to Liberum Capital research analyst Ben Davis, there is still a possibility that BHP could increase its offer price. Davis noted, "We are at a level where shareholders are increasingly vocal on capital discipline." He further explained that shareholders have become weary of BHP bidding against itself and may not support further increases unless Anglo or another bidder presents a new acceptable offer.

Over the past 12 months, BHP’s share price has risen by 4%, indicating investor confidence in the company’s strategic moves.

As the deadline for BHP's AU$75 billion takeover proposal of Anglo American approaches, the market is closely watching the developments. The outcome of these negotiations could significantly impact the future of both companies, particularly in the highly lucrative copper market. Investors are advised to stay tuned for updates as the situation evolves.

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