BHP Group’s options for its pursuit of rival miner Anglo American are narrowing as a May 22 deadline approaches for the mining giant to lodge a binding offer. BHP’s potential moves include sweetening its $42.7 billion buyout offer, making a hostile bid, or walking away for now.
BHP CEO Mike Henry and his team have been making the case for the mega-deal to BHP and Anglo shareholders, as a large proportion of BHP’s investors also hold shares in Anglo. Morningstar analyst Jon Mills suggests that it is now up to BHP to convince enough of Anglo’s institutional shareholders to pressure the board to engage with BHP, potentially with an even higher offer.
However, Anglo’s board has already rejected two all-share proposals from BHP as inadequate and difficult to execute. On Tuesday, Anglo unveiled plans for a break-up, focusing on energy transition metal copper while spinning out or selling its less profitable coal, nickel, diamond, and platinum businesses. This plan met with a mildly supportive response from Anglo investors, who said it provided a strategy but lacked details.
The restructuring plan proposed by Anglo is similar to BHP’s own plans for the takeover target, with the exception of Anglo keeping its South African iron ore assets and selling its Australian coal mines. An Anglo investor said that there was nothing compelling about the company’s restructuring proposal, and that Anglo management needs to push for a substantial increase in the offer price, potentially around 10%, and then wait for a potential rival bid from Glencore.
Glencore is reportedly studying a possible rival bid for Anglo, adding to the interloper risk that BHP faces, according to JPMorgan analyst Lyndon Fagan. Meanwhile, Rio Tinto CEO Jakob Stausholm said that his company is not afraid of mergers and acquisitions, but it has strong organic growth options.