The board of Anglo American appeared to soften its stance on a complete rejection of BHP’s buyout offer for some of its assets yesterday after agreeing to continue engagements with the board of the Australian mining giant ahead of a fresh deadline of May 29.
Anglo American said it had applied for an extension of the deadline for BHP to make a firm offer which lapsed yesterday but has now been extended.
BHP is bidding for Anglo American minus its South African iron ore and platinum group metals (PGM) units, with the focus now shifting to the boardroom as the two companies engage each other for a potential agreement over the next seven days.
“It is frustrating on the part of BHP, but at least they now have an official opportunity for them to convince the board of Anglo American,” a South African mining executive told Business Report yesterday.
“It seems the conditions precedent to consummation of the deal such as spinning out of Anglo Platinum and Kumba Iron Ore are of concern to Anglo more than the value of the transaction.”
Shares in BHP slumped 2.51% on the JSE to R544.39 after the announcement by Anglo American, whose shares closed yesterday’s trade session marginally higher by 0.36% at R617.95.
BHP on May 20 tabled its further revised offer which valued Anglo American at about $49.8 billion (R908bn) and argued that “the final offer ratio will not be increased, except that BHP reserves the right to increase and/or otherwise improve” it.
This would be conditional on a further offer or possible offer for Anglo American by a third party or on the JSE- and London-listed resource group announcing or recommending “an offer on better terms than the final offer ratio”.
Anglo American, in rejecting the third revised offer from BHP, said the latest proposal was likely to take 18 months or more to complete and carried significant execution and completion risks relating to both value and time.
Anglo American recently tabled its own strategy “to accelerate value delivery” which it expects to conclude within the same time frame.
“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,” said Anglo American chairperson Stuart Chambers.
“It does not address the board’s concerns about the structure, and consequently has the potential for material value leakage to be disproportionately suffered by Anglo American’s shareholders.”
BHP CEO Mike Henry said earlier that he was disappointed that the board of Anglo American was not providing his company with an opportunity for engagement regarding its offer.
Chambers said yesterday that the company’s board was now willing to engage with BHP.
“The board is willing to continue to engage with BHP and its advisers on this topic and has therefore requested a one-week extension to the deadline which has been consented to,” said Chambers.
There have been concerns from the South African government, labour and other stakeholders that the current structure to unbundle Kumba Iron Ore and Amplats is a disadvantage to the country.
BHP has, however, sought to reassure South Africa that it has good intentions as it will retain its own listing and that of the Anglo American subsidiaries on the JSE.
The Public Investment Corporation (PIC), which has interest in both companies, yesterday said it would be engaging the two companies to come up with an offer that reflects “the embedded value of existing Anglo assets and the future optionality and benefits that BHP can derive specifically from Anglo’s unlisted” assets.
“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,” said Abel Sithole, CEO of the PIC.
He added that the value and impact of Anglo American to South Africa “should not be diminished as a result of the proposed offer” by BHP.
There had to be “future and perpetual participation by South African shareholders in the acquired assets” through the JSE.
BUSINESS REPORT