Anglo American extends deadline for BHP takeover after rejecting improved bid

Financial Times

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Anglo American has extended talks with BHP over a takeover bid, keeping the prospect alive of the largest-ever deal in the mining sector, even after the UK-listed group rejected a third £38.6bn approach.

BHP now has until 5pm UK time on May 29 to make a formal bid for its smaller rival after increasing the number of shares on offer to Anglo investors in its third and “final” deal proposal.

Anglo will continue to engage with BHP for a further week, despite saying that it continues to hold “serious concerns” about the complex deal structure that requires it to spin off two South African units.

The extension keeps alive BHP’s hopes that it can still secure a deal that would transform the global mining industry and give the Australian company access to more copper, a metal vital for decarbonisation.

BHP said in a separate statement on Wednesday that its third all-share offer valued Anglo at £31.11 a share based on the May 22 closing price.

It said the preliminary proposal was its “final offer ratio” but added that it could be increased under certain conditions such as Anglo’s board agreeing to recommend a higher bid or a bid from a rival company for Anglo.

Anglo’s board unanimously rejected the third proposal. Chair Stuart Chambers said the bid “does not meet expectations of value delivered to Anglo American’s shareholders” but that the board was “willing to continue to engage with BHP and its advisers on this topic”.

Ben Davis, a mining analyst at Liberum, said the late twist meant a deal was still possible but that Anglo’s opposition to first spinning off its South African businesses remained a problem. “Final offers are never final and the door has been left open, but it’s difficult to see how to ‘make safe’ BHP’s proposed structure,” he said.

Anglo said the latest proposal valued its shares at £29.34 based on the closing price of its shares on April 23, before news of the merger talks became public. BHP’s previous offer valued Anglo at £27.53 per share, or £34bn. It had initially offered £25 a share, or £31bn.

The deal would hand Anglo shareholders 17.8 per cent of BHP’s shares and is a 47 per cent premium to Anglo’s share price before news of the merger talks became public, according to BHP.

BHP’s chief executive Mike Henry

The full article is available here. This article was published at FT Markets.