Anglo American Rejects BHP Billiton Bid: What Happens Next?
Was Anglo, right, to reject this offer.
It was certainly expected by most of us
that they would.
I mean, the premium that was kind of
implied by the offer was only about 13,
14% on the close.
You know, for a company that’s been
around for 100 years and were trading
above that offer just as recently as
last year, it feels like lowball bids on
top of the fact and kind of what they’ve
highlighted in their statement that, you
know, the structure was very
unattractive.
I mean, they were asked to spin out
Kumba and the Anglo platinum stake
holdings to their shareholders, which
would have created a huge amount of
flowback uncertainty.
We saw it with Tongala a couple of years
ago.
That whole register nearly flipped
within ten days.
So to try and, you know, accommodate
that would be incredibly difficult.
What is the BHP rationale for pushing
for that restructuring, as you say, has
all those complexities?
Yeah, it’s
it feels I mean, part of it is probably
a size issue, so it would be an easier
business to absorb.
But it clearly it sends a signal that
they’re not interested in South African
assets.
They’ve already made that clear when
they spun out their other South African
assets with the South32 vehicle.
So I can see why the South African
government might be a little said to be
doing it the second time around.
What would be Do you have a view on what
an attractive premium or an appropriate
or fair premium would be for this
business?
It would have to be.
It would be.
I mean, for us, we’re looking for at
least 30% to the close.
I think for for for that to be
considered by the board.
But even then, it’s it is challenging.
I know the reason why Anglo Flag’s this
is being so opportunistic is that they
have massively underperformed the rest
of the sector over the past 18, 24
months or so.
So, you know, this is ever since they
they had like all mining companies have
had a bad run of operational mishaps,
some of them their own fault, some of
them infrastructure related in terms of
what’s actually happening in South
Africa.
So too, yeah, for BHP it’s covered now
is always going to seem like a bit of a
Yeah, timing was a lot of speculation.
That won’t just be BHP making making a
bid for this for this company.
Who would top the list of other of other
potential contenders.
How much appetite is that within the
mining sector for this business?
So compared to where we were in 2012,
where people would just try to buy
anything and everything, it’s got a lot
calmer.
We saw Glencore Teck last year.
They probably got their hands full with
that as that goes through the through
the regulators.
So it’s not a long list of people.
Probably Freeport and Rio Tinto are the
top two names, but Rio Tinto in my mind
is probably the one that is most willing
to do the deal.
They’ve said themselves, or certainly in
recent commentary that they’re builders,
not buyers, particularly when it comes
to things like lithium, but that at the
end of the day, Anglo American is one of
the very few assets or companies around
which is somewhat in play that could be
acquired at a BHP.
I don’t I don’t think this current bid
obviously has not been successful, but
if they come back with a bit more,
they’re not going to just let BHP get
their hands on it.
So I expect their tune will change quite
rapidly over the next couple of weeks.
Okay.
So we watch for that from from Rio
Tinto.
How do you see this?
I mean, you touched you touched on it,
you know, to it.
How do you see this been unfolding in
the weeks and months and months ahead?
I don’t I it’s not going to get out of
control.
I don’t see you know, we’re not
expecting big cash bids or, you know,
real kind of where we were back in the
Supercycle Day kind of charge days.
But at the same time, you know, that
those copper assets are very much, you
know, there is a very bright minority of
them.
So, yeah, you expect the bid premium to
climb from here for sure.
But would a tie up between BHP and it’s
a big would this big question mark
clearly still over this year.
What would a tie up between BHP and
Anglo mean for the broader copper
sector.
Yeah, it’s, it’s one you know, the
regulators would be considering, I mean
it would make BHP the clear biggest
copper by the world.
They’re already actually overtaking
Codelco because of Gadhafi’s poor
performance.
But yeah, they’re going to be
considerable in size.
Now would this be an issue from a
competition perspective, which some
people have flagged?
I don’t think so.
From a concentration perspective, they
would have no impact.
And the idea that they would try and
influence prices by pulling back
production is somewhat farcical.
But the Chinese might try and stick
their or in that they did with Glencore
and Xstrata with the tie up there.
They don’t have real teeth, but
obviously they buy most of the world’s
commodities, so they have some part to
play.
Ben Davis, mining analyst at Liberum, comments on Anglo American’s widely-expected rejection of a $39 billion takeover proposal from BHP. Analysts and some Anglo investors had seen BHP’s proposal as well below the sort of price that would bring the 107-year-old miner to the table. “The structure was very unattractive,” Davis tells Bloomberg Television. “They were asked to spin out Kumba [Kumba Iron Ore] and the Anglo platinum [Anglo American Platinum] stake holdings to their shareholders, which would have created a huge amount of flowback uncertainty.”
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