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BHP (ASX: BHP) has withdrawn its proposal to buy Anglo American (LON: AAL) after the takeover target rejected early on Wednesday the world’s largest miner’s request to extend talks, and said that while it believes its bid was “compelling”, the company is committed to a “disciplined approach” to mergers and acquisitions.
“BHP will not be making a firm offer for Anglo American,” chief executive Mike Henry said in a statement published minutes before the 5 p.m. UK time deadline for the mining giant to make a formal bid. “While we believed that our proposal for Anglo American was a compelling opportunity to effectively grow the pie of value for both sets of shareholders, we were unable to reach agreement with Anglo American on our specific views in respect of South African regulatory risk and cost,” Henry noted.
Anglo said after markets closed the company had set out “a clear pathway” to accelerate delivery of its strategy and “to unlock significant value” for its shareholders. “Our shareholders will benefit from value transparency and undiluted exposure to a simpler portfolio of world class assets,” chairman Stuart Chambers said.
Anglo’s refusal earlier in the day argued that BHP had failed to address its concerns over the “highly complex and unattractive structure” of the proposed deal.
Analysts had warned that Anglo’s denial of BHP’s requested deadline extension indicated the mega deal was likely to be cancelled. RBC said in a note to investors on Wednesday the proposed $49.2 billion (£38.6bn) takeover structure is too complex for BHP to go hostile.
“If BHP doesn’t launch a formal bid, it will be barred from buying Anglo for six months, unless a competing offer emerges,” they wrote.
The mining giants had been in talks since May 22, when Anglo rebuffed BHP’s third bid, with the parties focused on finding a deal structure satisfactory to both.
BHP proposed a complicated transaction scheme, which remained the main bone of contention in the past five weeks of negotiations.
Anglo argued that the requirement to first spin off its majority stakes in two South African miners created excessive risk for its own investors, who would end up holding those shares. The target company wanted the suitor to either alter the structure of the proposal or compensate its shareholders for any loss of value as a result of the spinoffs.
BHP had said the risks associated with its takeover plan were “quantifiable and manageable”, adding that the costs of the proposed measures had already been incorporated into its offer.
“We remain of the view that our proposal was the most effective structure to deliver value for Anglo American shareholders, and we are confident that, working together with Anglo American, we could have obtained all required regulatory approvals, including in South Africa,” Henry said.
BHP’s main interest in targeting Anglo was its copper mines. An electrified world has become increasingly dependent on battery metals, particularly on copper, and BHP was, not surprisingly, eager to secure a leading position in this market. A tie-up would have given the mining giant about 10% of global copper production at a time when copper prices are hitting record-highs. They have climbed about 23% so far this year.
A successful deal not only would have reshaped the mining industry, but would have also boosted BHP’s presence in the world’s top copper producing countries, Chile and Peru. This would have made it the world’s largest producer of the metal, far surpassing Codelco.
Anglo American, which traces its roots in South Africa to its founding 107 years ago, has come up with its own sweeping break up plan. This includes keeping its copper and iron ore assets, the two most profitable units, and reducing investments in its Woodsmith fertilizer project in northern England. Despite some investors urging Anglo to shelve or offload the project, the company is not ready to part ways with it. Instead, it plans to find strategic investors who can support the resumption of full-scale operations at Woodsmith starting in 2026.
BHP had made some concessions to Anglo, hoping to reach an agreement. They included keeping Anglo’s office in Johannesburg fully staffed and listing BHP shares on the South African market. The company also mentioned its willingness to contribute to a potential increase in South African employee ownership of the two units, if it was necessary. These measures would have been upheld for a minimum of three years following the completion of the takeover.
Henry also expressed openness to negotiating a break fee in the event that regulatory authorities, including those in South Africa, block the potential deal.
According to UK regulations, BHP must now wait at least six months before thinking of approaching Anglo American again.
