BHP’s plan to divest the South African assets of its target Anglo American is a key part of the strategy behind the proposed $39 billion takeover, according to investors briefed on the miner’s thinking.
BHP’s initial takeover proposal, which was rejected by Anglo American on April 26, required Anglo to offload its shares in Kumba Iron Ore and Anglo American Platinum (Amplats) to its shareholders before any deal could take place. BHP owns 78.6% of Amplats and 69.7% of Kumba.
The South African government is scrutinizing the proposed deal, with the country’s mining minister, Gwede Mantashe, expressing wariness about BHP’s proposal, citing the country’s “not positive” previous experience with BHP.
However, BHP sees advantages for South Africa in a distribution of the Kumba and Amplats shares, as it would boost the free float in those two companies, fulfilling a goal of the country’s regulator. It would also trigger index-linked buying and put the assets in the hands of natural holders in South Africa, according to two fund managers.
“BHP have spent a lot of time looking at all the flow back implications and I’m confident they are all over it,” one of the fund managers said.
BHP declined to comment directly but referred to its May 2 statement, which said the structure of its takeover proposal, including the proposed distribution of Anglo’s shares in Amplats and Kumba to its shareholders, reflects the priorities for BHP’s portfolio and opportunity for synergies.
The divestment of Anglo American’s South African assets is expected to be a part of any revised offer from BHP, as it is a key element of the mining giant’s strategy for the proposed takeover.