Anglo American PLC on Monday said the latest bid proposal from mining peer BHP Group Ltd continues to ‘significantly undervalue’ it and its ‘future prospects.’
Anglo American Chair Stuart Chambers said: ‘The latest proposal from BHP again fails to recognise the value inherent in Anglo American.’
He said Anglo American shareholders are ‘well positioned’ to benefit from increasing demand from future enabling products while the increasing capital intensity to bring greenfield supply online makes proven assets with world class resource endowments ever more attractive.
He said the BHP proposal also continues to have a ‘highly unattractive structure.’
Earlier Monday, BHP confirmed it made an improved offer to buy Anglo American last week, but said the offer was rejected by the Anglo board on Monday.
‘Aside from significantly undervaluing Anglo American, the latest proposal continues to contemplate a structure which the board believes is highly unattractive for Anglo American’s shareholders, given the uncertainty and complexity inherent, and significant execution risks,’ Anglo American said in a statement.
‘The requirement to pursue two contemporaneous demergers creates significant uncertainty, which falls disproportionately to Anglo American shareholders,’ it added.
Anglo American pointed out that by requiring this as part of a takeover of Anglo American, it would result in additional approvals related to these two demergers. The timetable to obtain these additional approvals is expected to be lengthy, it added.
Anglo American said it had also taken into account detailed feedback from shareholders and stakeholders since the first approach from BHP became public on April 24.
Anglo American said it was confident in its standalone future prospects. Anglo American has accelerated plans for delivery of its standalone strategy and will provide a detailed investor update on May 14.
The new all-share offer from Melbourne-based BHP values London-based Anglo at £34 billion, up from £31.1 billion under its previous offer. BHP is offering 0.813 of a BHP share for each Anglo share, giving a current value to Anglo shares of £27.53 each, based on BHP’s own price.
Anglo shares were down 0.2% to 2,767.00 pence each in London on Monday afternoon. They were down 0.6% to R 636.97 in Johannesburg.
BHP has its primary listing in Sydney. In London, its shares were quoted at 2,290.00p, down 0.3%.
The revised proposal represents a 15% improvement in the merger exchange ratio, BHP noted. It increases the holding that Anglo shareholders would have in the combined entity to 16.6% from 14.8% previously.
BHP has a market capitalisation of £116.07 billion, while Anglo’s market cap is £36.90 billion.
BHP also offered Anglo two positions of the board of the combined company.
‘BHP put forward a revised proposal to the Anglo American board that we strongly believe would be a win-win for BHP and Anglo American shareholders,’ said BHP Chief Executive Officer Mike Henry. ‘We are disappointed that this second proposal has been rejected.’
As part of the proposed deal, BHP wants Anglo American to split off Anglo American Platinum Ltd and Kumba Iron Ore Ltd in South Africa.
South Africa’s state-owned asset management firm Public Investment Corp last week signalled that it remains open-minded about BHP’s bid for Anglo-American. PIC has a 7.0% stake in Anglo American, according to Morningstar.
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