(Bloomberg) — The world’s largest mining company, BHP Group Ltd., has taken a takeover approach for rival Anglo American Plc, a move that could cause the industry’s biggest shake-up in more than a decade.
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Anglo American, which has a market value of £27 billion ($34 billion), said late on Wednesday it had received an unsolicited all-stock merger proposal after Bloomberg reported that BHP was considering a possible offer. It added that BHP’s move was conditional on the spin-off of Anglo’s South African platinum and iron ore units.
If successful, the transaction would mark a return to large-scale dealmaking for BHP, which has revived its appetite for transformational acquisitions in recent years under CEO Mike Henry. A tie-up with Anglo would create the world’s largest copper miner ahead of the wave of demand from new energy sectors, and BHP’s move could chase away other suitors looking to increase output.
“If BHP does indeed continue to pursue this deal, we would be surprised if no other bidders emerge,” Jefferies LLC analysts led by Christopher LaFemina said in an emailed note. A bid that values Anglo at $42.6 billion – a 28% premium based on the last share price – could see a deal “cross the finish line”, they said.
Over the past year, Anglo’s shares have underperformed those of rivals, including heavyweight Anglo-Australian suitor. BHP, which trades in London and Sydney, has a market value of about $149 billion.
Anglo American has long been seen as a potential target among the biggest miners, especially as the country owns large South American copper operations at a time when most of the industry is eager to add reserves and production. However, candidates have been put off by the complex structure and mix of commodities, and especially by the high exposure to South Africa.
BHP produced about 1.2 million tonnes of copper on its own in 2023, while Anglo’s production was 826,000 tonnes. That would give the combined group a share of around 10% of the global mining supply. Jefferies said antitrust issues “would likely be an issue” for the deal because governments view copper as a strategic mineral.
Anglo has suffered a series of major setbacks over the past year as prices for some of its key products fell, while operational problems have forced the company to cut its production targets, dragging down its valuation and leaving the company vulnerable to potential bidders.
It said in its statement that the board was reviewing the proposal and there was no assurance that an offer would be made.
Read: Anglo-American posts sharp decline in profit and cuts dividend
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A successful takeover would mark the first megadeal between the world’s largest diversified miners in more than a decade. BHP and its biggest rivals spent years on the sidelines after a series of disastrous transactions, but have now warmed to the prospect of dealmaking after reassuring investors that they have learned from past mistakes.
“We would need to see the price BHP had in mind to get a better picture,” said Adrian Prendergast, senior analyst at Morgans Financial Ltd. in an emailed note. A takeover of Anglo would be “material but not transformative” for BHP given the size of the target, he said.
BHP bought copper producer OZ Minerals Ltd last year. for about $6.4 billion, its first major purchase in years, but has so far focused on selling assets such as oil, gas and coal.
The clear attraction here would be Anglo’s South American copper business, which has long been watched by bigger industry players – even though it has suffered recent setbacks and had to cut its copper production forecasts.
It is also possible that the Anglo proposal will now prompt others to take a step. No. 2 miner Rio Tinto Group has also invested in copper production, while Glencore Plc last year made an unsuccessful bid for Teck Resources Ltd., which has a coveted copper business, before ultimately reaching a deal for the Canadian company’s coal assets.
Read: BHP revives appetite for deals with biggest rivals in sight
Anglo’s valuation may make it more attractive, but it remains a very complicated matter. The company owns a majority stake in two South African listed miners – Anglo American Platinum Ltd. and Kumba Iron ore Ltd. – and is the majority shareholder of diamond miner De Beers. The country also has a long and complicated relationship with South Africa, where the state pension fund manager is the largest shareholder.
BHP’s proposal was to first transfer Anglo’s interests in the two South African companies to the smaller company’s investors before proceeding with an acquisition, Anglo said. The two parts of the proposal would be “interconditional,” the report said.
Anglo’s other businesses include copper, nickel, steelmaking, coal and Brazilian iron ore, as well as the iconic De Beers business.
Both companies are also investing in new fertilizer businesses: BHP is building a huge potash mine in Canada, while Anglo is developing a polyhalite mine on the east coast of England.
–With help from Martin Ritchie.
(Updates with graphs)
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