BHP is likely to make another revised and firm offer for Anglo American after the London and Johannesburg-listed resource firm yesterday announced a strategy to spin-off De Beers and Anglo American Platinum (Amplats), but retaining Kumba Iron Ore, ahead of the 22 May deadline stipulated by London listing rules.
This comes as Anglo American on Monday rejected BHP’s revised offer which raised the company’s valuation to nearly $43 billion (R792bn), leaving BHP CEO Mike Henry disappointed.
Anglo American yesterday laid out its defensive strategy in light of an expected second revised offer by BHP, which entails massive slowdown in crop nutrition, nickel care and maintenance, selling diamond steel-making iron ore and platinum units.
Market analyst Simon Brown told Business Report that demerging Amplats “would be real bad for the stock in the short to medium-term” outlook.
Anglo Platinum was not keen “to offload Kumba Iron Ore” as had been suggested by BHP in its initial and revised offers, he said.
Shares in Amplats and Anglo American fell by 7% and 4.79% to R729.50 and R604.39, respectively, on the JSE yesterday.
In contrast, Kumba Iron Ore traded 4.2% firmer at R547.34, while shares in BHP were 3.25% stronger at R545.16.
“Ironically the company (Anglo American) is doing essentially what BHP sought to do albeit for reasons of self-preservation,” said Sheila Khama, an extractives industry policy expert and former director with De Beers and Anglo American.
Anglo American’s new strategy will see it reduce capital expenditure for its crop nutrients operations by $200 million in 2025, and availing no capex for the segment in 2026.
It also said it would divest its steelmaking coal as it was “currently responding to strong buyer interest”.
Knowledgeable mining industry players told Business Report yesterday that BHP would likely raise its offer for Anglo American ahead of next Wednesday’s London deadline.
“Henry is emboldened by support from his board and shareholders to pursue the bid for Anglo,” said an analyst with a fund manager with exposure to one of the two companies.
“It’s just a matter of agreeing on the value that Anglo is looking for but in terms of strategy BHP is not far off from what Anglo has laid out for its strategy going forward.”
Seleho Tsatsi, a mining and investment analyst at Anchor Capital, told Business Report that BHP’s revised proposal had been made on May 7, and rejected nearly one week later whereas the first proposal was rejected the next day.
Other analysts said this gave credence to the Anglo American board giving a consideration for BHP’s offer, a development that was strengthening the Australian resource giant’s ambitions and expectations of eventually reaching an agreement.
Anglo American said its strategy for the SA platinum producing unit entailed demerging it “in a responsible and orderly way to optimise value” for both Anglo American’s and Amplat’s shareholders.
Analyst Dave Hazelwood said Amplats’s strategy to spin off its diamonds and platinum units reflected what the company “thinks of those commodities’ future” prospects.
“Anglo is keeping Kumba but getting rid of Amplats and De Beers,” Hazelwood said.
“So their view rightly or wrongly is about the commodity in question, not SA.”
Duncan Wanblad, the CEO of Anglo American, said by implementing the portfolio changes for its operations on its own, the company would be able to factor in the changes “in a manner that is respectful of our employees, host communities and countries, including ensuring that in South Africa in particular Anglo American continues to play its role as a responsible” business leader.
After BHP said recently that its proposal to spin off Kumba Iron Ore and Amplats under its proposed offer did not reflect a no confidence vote in South Africa, Henry said at the Bank of America Global Metals, Mining and Steel Conference 2024 yesterday that the Australian company had a good “track record of restructuring, merger and acquisition integration” and disposals.
He added that this had been demonstrated well by the recent acquisition of OZ Minerals, the Petroleum merger and demerger of South32 as well as its coal divestments.
BUSINESS REPORT