BHP investors fear costly second tilt at Anglo American Elouise FowlerReporter
Apr 29, 2024 – 6.31pm
The world’s largest miner, BHP, has been warned not to lob a “value destructive” improved bid for Anglo American and risk over-paying to secure the coveted copper assets contained in the beleaguered London-listed target’s empire.
Shares in BHP have declined 5.2 per cent since it made the $60 billion bid for Anglo American that was swiftly rejected last week, raising the prospect of a better deal being extracted from BHP. The value fluctuates with BHP’s share price.
BHP shareholder Prasad Patkar from Platypus Asset Management cautioned the Melbourne-based miner: “As a rule, large M&A is value destructive,” he said.
“So investors are rightly expressing a sceptical reaction to the proposed deal as can be seen from the way BHP shares are trading.” The stock has fallen to $42.97 on Monday from $54.32, while Anglo American shares have rallied 24.5 per cent to £26.83 since last Thursday.
Mr Patkar added: “We are holders of BHP and are concerned about the bid. It seems to be an industry plagued with short memories of how badly large M&A has destroyed shareholder value. We would hope that the BHP board exercise discipline.”
Anglo American last week dismissed BHP’s approach as “opportunistic” and failing to adequately value its prospects, primarily its copper assets, a desirable metal needed for decarbonisation, electricity transmission and data centres.
Anglo American shareholders will gather at their annual general meeting in London on Tuesday (8pm AEST), where the board and management will be quizzed on the merits of the offer and the capacity to elicit an improved bid.
The miner – which has 90,000 staff and assets spanning South American copper mines to Queensland coal seams – has been under pressure after it reported a 31 per cent drop in underlying earnings of $US10 billion ($15.3 billion) in the 2023 financial year.
It had attributed the slump partly to its diamonds business but argued that demand trends for metals and minerals generally have “rarely looked better”.
Still, BHP is eyeing the miner as a way to increase its copper exposure.
Chief executive Mike Henry is determined to secure more copper assets on top of last year’s $9.6 billion acquisition of OZ Minerals and its own trophy assets including South Australia’s Olympic Dam mine.
The world’s sources of copper are being depleted and modern mines are extracting lower grade ore. Anglo American shareholder L1 Capital estimates that six times the material is required to be mined to produce the same amount of copper as at the start of a mine’s life.
Further, 2.5 times more copper is required than other commodities to build an electric vehicle, according to the investment manager.
Anglo American investors were pitched 0.7097 BHP shares for every share they own in the target, plus a pro-rata distribution of Anglo American’s shares in the listed Anglo Platinum and Kumba iron ore businesses. Anglo rejected the offer on Friday.
