BHP states case for deal set to shake up mining

BHP has outlined the potential benefits of swallowing fellow global miner Anglo American after news broke of a $59 billion takeover proposal. The deal, which would create the world’s largest copper miner, would represent the biggest shakeup of the global mining industry in more than a decade, according to analysts Wood Mackenzie. In a statement to the market today, BHP confirmed that on April 16 it made a proposal to Anglo's board of directors comprising an all-share offer for the company, subject to the pro-rata distribution of its entire shareholdings in Anglo Platinum and Kumba Iron Ore. The combined entity would have a leading portfolio of large, low-cost, long-life Tier 1 assets focused on iron ore and metallurgical coal and future facing commodities, including potash and copper, BHP said. It said the benefits to BHP shareholders would include: increasing BHP’s exposure to future-facing commodities through Anglo American’s world class copper assets; complementing BHP’s iron ore and metallurgical coal portfolios with Anglo American’s high quality iron ore operations in Brazil and metallurgical coal assets in Queensland, Australia; providing Anglo American’s value adding copper growth options and increased geographic diversification of operating footprint; and delivering meaningful synergies. The combined entity would retain BHP's global listings on the ASX, LSE, JSE and NYSE. The proposal is non-binding and subject to conditions including completion of due diligence. If the bid went ahead successfully, it would be the biggest in BHP’s history and one of the year's biggest merger and acquisition deals across any sector, according to Wood Mackenzie. Deal 'all about copper' "BHP has spent the last 10 years simplifying their asset base only to buy one of the most complex portfolios in the industry,” Wood Mackenzie metals and mining corporate research director James Whiteside said. "However, this deal is all about copper and when greenfield options look limited and expensive it makes sense for (BHP) to look for more workable solutions." The deal would also reinforce BHP’s leading position in iron ore and metallurgical coal. It would add Anglo’s Moranbah, Grosvenor, Dawson and Aquila mines to BHP Mitsubishi Alliance's raft of Bowen Basin coal assets. "The notable pivot here is the move away from a myopic focus on future facing commodities with premium quality metallurgical coal regaining priority status in the company’s portfolio,” Mr Whiteside said. But he said Anglo American shareholders may consider fair value closer to the share price in 2023 before operational issues emerged, and other suitors may be compelled to act at this price. Under the terms of the proposal, ordinary shareholders of Anglo American would receive 0.7097 BHP shares for each ordinary share in Anglo American; and ordinary shares in Anglo Platinum and Kumba (to be distributed in direct proportion to each shareholder’s effective interest in Anglo Platinum and Kumba). The terms of the proposal would, based on closing market prices as at April 23, represent a total value of approximately £25.08 per Anglo American ordinary share including £4.86 in Anglo Platinum shares and £3.40 in Kumba shares, valuing Anglo American’s share capital at £31.1 billion (about $59 billion in Australian dollars). They include a premium on the implied market value of Anglo American’s unlisted assets of approximately 31 per cent; a premium on the implied market value of Anglo American’s unlisted assets of approximately 78 per cent; and a 19 per cent premium to the broker median net asset value of Anglo American excluding Anglo Platinum and Kumba of $US 21.8 billion, according to BHP.

BHP states case for deal set to shake up mining

Industry Queensland

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