BHP walked away from its nearly $50 billion (R898bn) offer for Anglo American as it was not willing to overpay and compromise on what it believed to be the right strategy and structure of the London- and Johannesburg-listed resource group.
This comes as Anglo American on Wednesday rejected BHP’s request for further extension to the May 29 deadline for it to make a firm offer, resulting in BHP walking away from making a firm offer as required by London listing rules.
“BHP Group Ltd confirms that it does not intend to make a firm offer for Anglo American plc,” BHP said in a statement shortly before the 5pm London deadline.
Analysts have said that BHP walked away because it was not willing to overpay for Anglo American.
“BHP walks away from Anglo deal. (It is) not prepared to overpay,” said Wayne McCurrie, FNB wealth and investments analyst.
McCurrie said the focus would now be on how Anglo American progresses with its restructuring plans that include disposing of diamond producer De Beers and Anglo American Platinum (Amplats).
Fund managers in South Africa told Business Report yesterday that BHP believed that Amplats and Kumba Iron Ore would not be necessary for its portfolio.
They said this was a major point of disagreement in negotiations between the two companies.
According to Anglo American, engagements between the two companies over the past week had failed to reach a common position.
“On 28 May 2024, BHP put forward a limited number of socio-economic measures that were confined in scope, impact and duration and that BHP stated would support regulatory approvals,” Anglo American said in a statement.
With the clock ticking and only a few minutes before the deadline on Wednesday, BHP confirmed that it would not be making a firm offer for Anglo American.
“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,” said Mike Henry, the CEO of BHP.
“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.”
Although BHP walked away from making a firm offer for Anglo American, it said it would set aside this decision on certain conditions.
These include “the board of directors of Anglo American agreeing to this statement being set aside” and “a third party announcing a firm intention to make an offer for Anglo American” as well as Anglo American announcing a “waiver proposal or a reverse” takeover.
BHP insisted on Wednesday that the proposed measures it had put forward provided substantial risk protection for Anglo American shareholders and supplemented the significant value uplift that Anglo American shareholders would receive from its acquisition of the Johannesburg- and London-listed group.
BHP said the initial extension of the deadline provided it the opportunity to engage with Anglo American about its concerns regarding BHP’s proposal.
“Since the extension to the deadline, BHP has continued to work extensively to address those matters. This has included several engagements with Anglo American and its advisers,” it said.
The Australian company had proposed a range of socio-economic measures intended to address Anglo American’s concerns.
For example, it was willing to discuss an appropriate reverse break fee, payable by BHP, on failure to achieve the necessary anti-trust and regulatory approvals, including in South Africa.
Its offer also comprised leeway to retain Anglo Platinum and Kumba Iron Ore’s listings on the JSE while also maintaining its listing on the JSE.
JP Morgan Chase analysts said that if concluded, the BHP offer for Anglo American could result in outflows of as much as $4.3bn from South Africa.
“The BHP proposal is in clear contrast to Anglo American’s simpler stand-alone plan to accelerate value delivery, as announced on 14 May 2024,” said Anglo American.
BUSINESS REPORT