BHP, the world’s biggest listed mining group, is determined to stand firm on the structure and value of its latest takeover proposal for Anglo American, according to sources familiar with the matter.
BHP has been granted a one-week extension, until May 29, to make a firm bid for Anglo American or walk away for at least six months under the UK’s takeover rules.
Two sources involved in the talks said BHP management will spend the next week addressing Anglo’s concerns about completion and execution risks, with the goal of convincing Anglo to agree to open its books and allow a further extension.
Anglo’s chairman, Stuart Chambers, had previously highlighted concerns about these risks in BHP’s proposal, indicating that the structure of the deal and the fate of Anglo’s businesses in South Africa remain significant obstacles.
To address these concerns, BHP has already offered to foot the bill to demerge Kumba Iron Ore, which is expected to net the South African government $2 billion in much-needed capital gains tax.
The deal is also complicated by Anglo’s recent announcement to spin-off or sell its less profitable nickel, diamond, and platinum businesses to refocus on copper, as well as its plan to sell its coal assets. These spin-out costs would ultimately be borne by Anglo’s shareholders if the deal does not go ahead.
Analysts believe that if the deal does not materialize, Anglo’s CEO, Duncan Wanblad, will be under pressure to get top dollar for its diamonds business and ensure its demergers proceed without any issues, as BHP will be ready to pounce.
BHP and Anglo are currently holding joint meetings with UK and Australian regulators this week, according to a separate source.
BHP’s latest offer of 29.34 pounds per share, based on undisturbed share prices as of April 23, valued London-listed Anglo at 38.6 billion pounds (around $49.1 billion). The offer is still conditional on Anglo unbundling its platinum and iron ore assets in South Africa.