BHP gives up on Anglo American deal after rejections

Australian mining giant BHP has walked away from its proposed deal with Anglo American, the London and Johannesburg-listed firm with major interests in South Africa, according to a statement from BHP chief executive Mike Henry.

“BHP will not be making a firm offer for Anglo American,” said Henry. 

“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 and, despite seeking to engage constructively and numerous requests, we were not able to access from Anglo American key information required to formulate measures to address the excess risk they perceive.”

The statement came at the close of a one-week extension of the UK Takeover Panel’s bid deadline, which Anglo American granted on 22 May.

In a press release, Anglo stated that BHP failed to address its fundamental concerns of the risk associated with demerging South Africa-based Anglo American Platinum and Kumba Iron Ore, and it therefore sees no basis for extending the deadline again.

The conclusion comes more than a month since BHP made its first offer to take over its smaller rival for $39bn. Since then, BHP had upped its offering price on two occasions to $43bn at the start of May, and made a “final offer”’ of $49bn last week. 

Anglo’s alternative plan

At the same time, Anglo has come out with its own ‘accelerating value delivery’ plan, which positions the firm to refocus on copper while spinning out or selling its less-profitable coal, nickel, diamond and platinum businesses.

“Throughout the engagements with BHP, BHP continues to restate its belief that the risks of its complex structure are not material, yet has repeatedly and consistently stated both publicly and during the engagements that it is unwilling to amend its proposed structure to assume these risks,” said a statement from Anglo American.  

BHP, on the other hand, “believes that the risks are quantifiable and manageable,” according to today’s statement, and has stated that it has already factored the costs associated with these risks into its proposal.

BHP had stated its intention to continue Anglo American’s legacy of social investment in South Africa in order to ease concerns, proposing socio-economic initiatives such as maintaining current staff levels at Anglo’s Johannesburg office and keeping BHP listed on the Johannesburg Stock Exchange for at least three years. Anglo American has called these measures “confined in scope, impact and duration”.