Anglo American Looks to Exit Diamond and Platinum Mining Sector to Avoid BHP Takeover

BHP - Mining

Anglo American Plc has announced a strategic restructuring aimed at exiting diamond, platinum, and coal mining sectors, as it seeks to thwart a £34 billion ($43 billion) bid from competitor BHP Group and transition into a copper-focused enterprise.

The decision comes in response to BHP’s persistent takeover attempts, which Anglo has twice rebuffed, and also reflects shareholder pressure to divest from less lucrative ventures and concentrate on its prized copper assets. The move streamlines Anglo’s operations, potentially enhancing its appeal to potential suitors.

Anglo’s CEO Duncan Wanblad outlined a comprehensive transformation plan mirroring a proposal previously presented by BHP’s CEO Mike Henry. With both leaders sharing a similar vision for Anglo’s portfolio, shareholders must now weigh their confidence in each company’s ability to execute.

BHP – Mining

The company is banking on shareholder endorsement of its strategy and trust in management’s ability to execute it, rather than succumbing to BHP’s bid.

Investors perceive copper as the crown jewel due to its pivotal role in the energy transition, and Anglo’s latest move addresses their calls for action. Notably, activist investor Elliott Investment Management is among Anglo’s shareholders.

“There’s still a debate over whether this really offers shareholders more than BHP’s improved offer,” remarked Dawid Heyl, a portfolio manager at Ninety One, a major shareholder based in Cape Town. Although he viewed the plan as robust, Heyl acknowledged it would create a streamlined Anglo that “would be attractive to others as well.”

Following the announcement, Anglo’s shares dipped by 2.5% to £26.38 in London trading, falling below BHP’s offering price of £27.53. This suggests investors perceive diminished prospects for a successful BHP bid. In Johannesburg, Amplats, the platinum business, experienced a decline of up to 10%.

BHP – Anglo American

Now, the ball is in BHP’s court to determine its response. Despite two rejected offers, BHP’s revised bid failed to address one major hurdle: Anglo deemed BHP’s condition to spin off South African assets before the takeover unworkable. However, with Anglo proposing to spin off Amplats, BHP may bolster its case that such a spin-off is feasible.

“The outcome of Anglo’s strategic review will not have changed BHP’s plans, but they are probably actively assessing where they are now in light of this,” commented Lachlan Shaw, an analyst at UBS Group AG.

Anglo will refocus on its copper mines and iron ore, its primary revenue generators and the assets most coveted by BHP. Despite investor pressure to exit its Woodsmith fertilizer project in northern England, Anglo plans to continue with the project while significantly reducing spending.

Jessica Smith
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