Ann: Update on BHP offer for Anglo American, page-18

Failed Anglo bid is net negative for BHP CEO
29 May 2024 06:05
(The author is a Reuters Breakingviews columnist. The opinionsexpressed are her own.)By Karen Kwok LONDON, May 29 (Reuters Breakingviews) -
There’s nothird time lucky for Mike Henry. The BHP chiefexecutive’s five-week pursuit of Anglo American ended onWednesday when the London-listed group rejected the Australianminer’s request to extend talks about a $47 billion takeover.It’s an embarrassing setback for Henry, who appears to havemisjudged his target’s openness to a deal. At least he preservedhis reputation for financial discipline – and may yet get thechance to try again.Anglo left the door open for a negotiated deal last weekwhen it agreed to extend talks by seven days, despite rejectingBHP’s third all-share proposal. However, the two sides have madelittle progress since. Anglo’s board objected to BHP’s demandthat the company unbundle its listed South African platinum andiron ore units before the Australian group proceeded with itsall-share offer.These two businesses have a combined value of about $14billion, about a third of Anglo’s value. Anglo shareholderswould bear the risk that the value of the companies would fallafter they were spun off. The deal would also attract scrutinyfrom South Africa’s Competition Tribunal, which considers howdeals affect the local community and employment. Concessions canbe pricey: when Heineken spent 2.4 billion euros on brewerDistell in 2021, the Dutch brewer had to pledge more than 500million euros of local capital investment.BHP on Wednesday said it had offered some commitments,including maintaining Anglo’s employment in South Africa for atleast three years and setting up a “Mining Centre ofExcellence”. It also insisted that the risks attached with thespinoffs were “quantifiable and manageable” and that BHP wouldbe willing to pay a break fee if the deal failed to clearregulatory hurdles. However, as Anglo pointed out, theAustralian group was not prepared to directly take on the risksassociated with the spinoffs itself.Anglo boss Duncan Wanblad must now prove to shareholdersthat the company’s own breakup plan, which he hurriedly unveiledearlier this month, can deliver value by divesting the company’sdiamond, nickel, steelmaking coal and South African platinumoperations. Anglo shares fell below 25 pounds on Wednesday, 16%below the implied value of BHP’s offer.Henry, meanwhile, must revisit his own growth plans. Analystestimates compiled by Visible Alpha suggest BHP’s EBITDA willpeak in the fiscal year to June 2025 and then decline for fiveyears. However, Henry has a range of options. He could bid forCanadian miner Teck’s metals business or make an offer forAnglo’s coal unit. And if Anglo stumbles again, BHP will be freeto come back in six months’ time. On balance, though, Henry’sfailed bid is a net negative.Follow @karenkkwok on XCONTEXT NEWSBHP on May 29 said it did not intend to make a formal offerfor Anglo American, walking away from its $47 billion takeoverfor at least six months, after Anglo rejected BHP’srequest for more time to discuss its takeover proposal for theUK-listed mining group.“We remain of the view that our proposal was the mosteffective structure to deliver value for Anglo Americanshareholders, and we are confident that, working together withAnglo American, we could have obtained all required regulatoryapprovals, including in South Africa,” BHP Chief Executive MikeHenry said.Earlier in the day, London-listed Anglo said it had rejectedBHP’s request for more time to discuss the deal, a week afteragreeing to extend discussions with BHP to iron out concernsover the structure of the proposed deal. The Australian groupwanted Anglo to unbundle its South African platinum and iron oreunits before the takeover.On May 29, BHP said it needed more time to engage withAnglo, while outlining commitments to minimise regulatory riskin South Africa and saying it would offer a break fee if thedeal failed to gain regulatory approvals.Those commitments included job security for employees inSouth Africa. BHP also said it would shoulder the costs ofincreased South African employee ownership that is expected tobe required in any demerger.“Throughout the engagements with BHP, BHP continues torestate its belief that the risks of its complex structure arenot material, yet has repeatedly and consistently stated bothpublicly and during the engagements that it is unwilling toamend its proposed structure to assume these risks,” Anglo saidin a statement. BHP said Anglo’s assertion was “not accurate”.Anglo shares were down 3.8% to 24.57 pounds as of 1532 GMTon May 29. BHP’s shares closed flat at A$45.08.

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Graphic: BHP’s final offer was worth more than Anglo’s shares https://reut.rs/3wUug8X