On Wednesday, the miner giant BHP group discarded the long sought deal to take over rival Anglo American after its last ditch request for more time was denied by the latter. The comapny had been pursuing the deal for six weeks now.
The mining giant said it was denied access to “key information” from Anglo during the negotiations “despite numerous requests”. BHP’s chief executive Mike Henry said it was “unable to reach agreement with Anglo American on our specific views in respect of South African regulatory risk and cost”.
BHP is so keen on acquiring Anglo because of the potential expansion in the copper portfolio. It wanted to secure Anglo’s prized copper assets in Latin America and increase access to metal streamlining with the global shift towards clean energy and electric vehicles. Had the deal been successful, it could potentially dominate the global supply of coking coal.
The deal pitched by BHP required Anglo American to unbundle its South African platinum and iron ore businesses. But the London listed company believes it will be able to provide greater value to its shareholders without the merger.
“Our shareholders will benefit from value transparency and undiluted exposure to a simpler portfolio of world class assets, consistently stronger operational performance, and highly attractive growth in copper, premium iron ore and crop nutrients,” the company said.
BHP’s Previous bids
Last month, BHP proposed its first $39 bn deal to buy Anglo American due to significant undervaluation of the company and its prospects. Later, it proposed another $42.67 bn takeover proposal, with plans to divest Anglo American’s South African assets, which again got rejected.
To shake away BHP’s enthusiasm, Anglo American strategized to refocus on copper and offload less profitable coal, nickel, diamond and platinum assets. Further it suspended global hiring and simplified operations to prevent them from taking over.
A week ago, Anglo granted them a seven day extension to come up with an improvised version of the takeover deal, after it rejected BHP’s third proposal of $49 bn.
Anglo American Shares analysis
Brokerage firm Jefferies downgraded Anglo American after the deal with mining giant BHP group limited failed terribly, citing potential risks as the company is undergoing some restructuring.
It demoted the Anglo London shares recommendation from Buy to Hold and also cut the stock’s price target to 2,700 pence from 3,200 pence. The new PT represents an upside of about 9% from current levels.
Jefferies analysts said that Anglo must now execute its own proposed restructuring, which includes a demerger of the South African business, a sale or spin-off of its De Beers diamond unit, a sale of its metallurgical coal business and a review of its nickel business.
As of May 30 at 16:36 (UTC+1) Anglo American shares closed at Rs.2510 per share.
