Anglo American Rejects BHP's Plea to Extend $50 Billion Takeover Talks — 4th Update

By Christian Moess Laursen

Anglo American rejected Australian mining giant BHP's plea to extend $50 billion takeover talks Wednesday, hours before the deadline for BHP to commit to an offer or walk away.

BHP, the world's largest miner by market cap, earlier in the day outlined a range of measures aimed at addressing Anglo's concerns about the structure of the proposed deal.

"This approach doesn't sufficiently address the fact that Anglo American's shareholders would bear disproportionate execution and value risks and uncertainty over an extended period," Anglo said.

Last week, Anglo rebuffed a bid from BHP for the third time, calling it too complex. The latest offer valued Anglo at $49.87 billion.

BHP's offer proposes the spinoff of Anglo's South African units Anglo American Platinum and Kumba Iron Ore--a condition that Anglo said has significant execution risks.

Among the proposed measures outlined Wednesday, the two units would retain listings in Johannesburg and be run by South Africa-based management teams. Headcount at Anglo's Johannesburg office would be maintained.

BHP also committed to build a training facility in South Africa and promote the country as a mining destination, as well as support local procurement.

It said it was confident these measures--which would be maintained for at least three years--resolve Anglo's concerns, and would support South African regulatory approvals. The integration challenges are quantifiable and manageable, and the costs associated with them have already been factored into the offer, BHP said.

However, while the measures should ease concerns about some of the risks embedded in the deal structure, BHP didn't specify the cost associated with them, making it difficult to assess the value included in its offer, RBC Capital Markets analyst Marina Calero said in a note to clients.

The London-based miner reiterated Wednesday that it favored its prospects as a standalone company. Earlier this month, it accelerated a business overhaul to break itself up in order to fend off BHP.

BHP said Wednesday that its proposed measures would provide greater economic benefits to South Africa than Anglo's planned restructure.

It added that it is open to discuss paying a termination fee if the deal fails to achieve necessary antitrust and regulatory approvals.

BHP has until 1600 GMT to commit to a bid or walk away under U.K. rules. The rules stipulate a request to extend the deadline can only be done by the offeree, leaving BHP with the option of withdrawing or going hostile.

If BHP were to go hostile it would have to buy the whole of Anglo, including the South African units it doesn't want, and possibly explore spinning them off itself. Given this complexity, the likelihood of BHP taking the hostile route is low, according to RBC's Calero.

Speculation of other bidders emerging followed news of the deal, but so far none of the likely suitors have commented.

"Given the scale of the transaction there are not many potential suitors with Glencore, Rio Tinto and Vale as the most likely candidates," RBC said.

At 1151 GMT, Anglo traded down 1.4% at GBP25.23, below the latest bid that valued the company at GBP29.34 a share based on share prices before BHP's initial proposal became public last month.

Meanwhile, BHP's share in London were up 1.7% at GBP23.75.

Write to Christian Moess Laursen at christian.moess@wsj.com

(END) Dow Jones Newswires

May 29, 2024 08:10 ET (12:10 GMT)

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