BHP (ASX:BHP) Group Ltd has secured an additional week to persuade Anglo American (JO:AGLJ) PLC's board to consider a complex divestment plan, following a "final" offer valued at $74.2 billion (£38.6 billion).
Anglo American’s board rejected BHP’s offer on Wednesday, citing BHP’s condition that Anglo divests its stakes in South African-listed Amplats and Kumba Iron Ore before a shareholder vote.
However, BHP’s latest bid proposes that Anglo shareholders would receive 17.8% of the merged entity, translating to 0.8860 BHP shares per Anglo share, a 24.8% increase over the initial bid.
BHP estimates its offer values Anglo shares at £31.11 each, including £5.40 in Amplats shares and £4.23 in Kumba shares.
Unacceptable bid
Anglo's board unanimously rejected the bid, deeming the structure unacceptable and extending the deadline for BHP to make a firm offer until May 29 under the UK Takeovers Code.
“The board is confident in Anglo American’s standalone future prospects and believes that Anglo American has set out a clear pathway and time frame to deliver the acceleration of its strategy to unlock significant and undiluted value for Anglo American’s shareholders,” Anglo American chairman Stuart Chambers said.
“The board considered BHP’s latest proposal carefully, concluded it does not meet expectations of value delivered to Anglo American’s shareholders, and has unanimously rejected it.
"In particular, it does not address the board’s concerns about the structure, which results in significant complexity, execution risks, an extended timeline to completion and consequently has the potential for material value leakage to be disproportionately suffered by Anglo American’s shareholders.
“Multiple engagements with the BHP team have not yet been able to resolve the concerns on these issues.”
Some hope
BHP CEO Mike Henry highlighted the offer's potential benefits stating there would be “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.”
Notably, South Africa’s Public Investment Corporation (PIC), Anglo’s largest shareholder, indicated conditional support for the proposal, provided it includes a secondary listing on the Johannesburg Stock Exchange. PIC CEO Abel Sithole stressed the need for BHP’s offer to reflect the embedded value of Anglo’s assets and future benefits.
“This would require a meaningful revision of the current BHP proposal that should take into consideration the material risks that current shareholders of both Anglo and its subsidiaries would have to assume over an extended time frame,” Sithole said.
“In addition, there has to be future and perpetual participation by South African shareholders in the acquired assets through the JSE.”
Anglo shares closed at £26.62, reflecting a slight decline in overnight trading.