BHP Group Ltd (ASX: BHP) has today confirmed its offer to takeover fellow mining giant Anglo American plc, following press speculation of a potential deal which had unsettled shareholder groups and financial firms in London, and provoked criticism from a South African government minister.
In early trade BHP was almost 4 per cent down on the ASX at $43.4.
In its statement to the Australian Stock Exchange, BHP acknowledged its proposal to Anglo American’s board of directors on April 16 to combine the two companies through a scheme of arrangement.
According to this deal, the company would obtain all shares in Anglo American, including shareholdings in the latter’s Anglo American Platinum Ltd and Kumba Iron Ore Ltd, for a total value of approximately GB £25.08 per Anglo American ordinary share including GB £4.86 in Anglo Platinum shares and £3.40 in Kumba shares, for a total of £31.1 billion.
Anglo American shareholders would in return receive 0.7097 BHP shares for each ordinary share in Anglo American; and ordinary shares in Anglo Platinum and Kumba (which would be distributed by Anglo American to its shareholders in direct proportion to each shareholder’s effective interest in Anglo Platinum and Kumba).
These terms were based on the closing market prices on April 23.
In its statement, BHP claimed the deal would be beneficial for both parties, with Anglo American bringing ‘its assets and long-term growth potential’ and BHP brining ‘its higher margin cash generative assets and growth projects along with its larger free cash flows and stronger balance sheet’, with the company having a market valuation of about A$229 billion. (£119.5bn).
It was added that the resulting combined entity would continue to enjoy BHP’s listing status on the ASX, LSE, JSE and NYSE, and that Anglo American shareholders would ‘benefit from the BHP’s monthly share trading liquidity of approximately US $10 billion’.
Hints of the takeover shook the finance world prior to the announcement on Friday, and attracted criticism from some in the South African government, including mining minister Gwede Mantashe, who told the Financial Times that his country’s previous experience with BHP was ‘not positive’, and he was therefore unsupportive of the plan, although he stressed that the government had not officially taken a position on the matter.
South Africa is home to many of Anglo America’s operations, including those mining for platinum, diamonds and iron ore. Furthermore, state-owned Public Investment Corporation (PIC) is Anglo American’s biggest shareholder.
According to reports BHP will seek to unbundle Anglo’s South African located platinum and iron ore operations.
Financial figures in London also expressed concern that due to BHP’s primary listing in Australia, the takeover of Anglo American would mean the loss of one of the London Stock Exchanges biggest 25 companies: Anglo American – which was established in 1917 in South Africa, has long been associated with premium mining assets including De Beers diamonds.
The decision appears to have been influenced by BHP’s desire to enhance its copper portfolio, taking on many of Anglo American’s projects in South America, with the company acknowledging that its shareholders would benefit from ‘increasing BHP’s exposure to future facing commodities through Anglo American’s world class copper assets’.
BHP shares have been trading at $45.23.