BHP Group finds itself with a shrinking set of choices as the deadline for its proposed acquisition of Anglo American rapidly approaches. The company faces a pivotal decision: increase the offer, initiate a hostile takeover, or abandon the pursuit for the time being.
As BHP deliberates its next course of action, CEO Mike Henry and his team have been actively advocating for the merger. They have presented their case to investors, many of whom also hold shares in Anglo American, during an investor conference in Miami and other venues.
One industry analyst has suggested that BHP needs to persuade a sufficient number of Anglo’s institutional shareholders to put pressure on the company’s board to engage in discussions with BHP. This could potentially lead to a higher offer if the board agrees to negotiate.
Anglo’s board has already rejected two all-share proposals from BHP, deeming them inadequate and challenging to execute. In response, Anglo recently unveiled plans for a restructuring that would focus on energy transition metals like copper, while divesting or spinning off its less profitable coal, nickel, diamond, and platinum businesses.
While Anglo’s restructuring plan received a moderately positive response from investors, some expressed reservations about the lack of specifics. Additionally, with the exception of Anglo retaining its South African iron ore assets and selling its Australian coal mines, the plan bears similarities to BHP’s own vision for the company.
One Anglo investor, representing a top 25 shareholder, revealed that there was nothing particularly compelling about the company’s restructuring proposal. This lackluster response was reflected in Anglo’s share price, which closed below BHP’s latest offer on Tuesday.
Furthermore, there have been reports that Swiss commodities group Glencore is exploring a potential rival bid for Anglo American. This adds another layer of complexity to the situation and increases the pressure on BHP to make a decisive move.
Under UK regulations, BHP has just one week remaining to submit a binding offer for Anglo American or be forced to withdraw for at least six months.
BHP has outlined several options for a revised bid, including improving the share ratio, incorporating some cash, or a combination of both. However, the company has also indicated to investors that the Anglo American acquisition is not a make-or-break deal and may require a reevaluation.
This possibility is increasingly being factored into BHP’s share price, which has been on the rise. BHP shares rose 2.6% on Wednesday, suggesting that investors are anticipating a potential withdrawal from the deal.
In conclusion, BHP faces a critical juncture in its pursuit of Anglo American. The company must carefully weigh its options and decide whether to increase its offer, launch a hostile takeover, or walk away from the deal. The outcome of this decision will have far-reaching implications for both companies and the broader mining industry.
