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BHP has proposed a £31 billion takeover of Anglo American, which would bring together two global mining companies and be one of the sector’s biggest deals in years.
The world’s largest mining group said on Thursday it had offered 0.7097 BHP shares for each Anglo share, in a bid to expand its copper mining portfolio.
BHP said its offer valued each Anglo share at £25.08. Shares in Anglo rose 13 per cent to £24.89 in early trading in London, giving the company a market capitalization of £30.5 billion.
Demand for copper is expected to soar due to the global shift away from fossil fuels. The metal is widely used in renewable energy projects and electric vehicles.
The deal would elevate BHP to the rank of the world’s largest copper producer, up from third currently, according to RBC. The combined group would produce more than 2 million tonnes of copper per year, or around 10 percent of the world’s mining supply.
BHP said it would increase its “exposure to future-facing commodities through Anglo American’s world-class copper assets”. A merger between the two listed groups would be one of the most influential in the mining sector since the acquisition of Xstrata by Glencore in 2013.
Anglo has some of the sector’s most coveted copper mines in Peru and Chile, but its CEO Duncan Wanblad has been under intense pressure since December, when the company revealed significant downward revisions to its production forecasts . Anglo said it had received an unsolicited offer from BHP and was reviewing it.
Its diamond division and platinum metals unit of De Beers have been hit by low prices. The company’s London-listed shares have fallen by more than a third since the start of last year before recovering following the announcement of the offer.
Shares in BHP, which has its main listing in Sydney and a market capitalization of A$229 billion (US$149 billion), fell 0.6 percent to A$45.23 on Thursday.
Anglo said that as part of any deal, BHP was proposing to spin off two Anglo units: Anglo American Platinum, the platinum division known as Amplats, and Kumba Iron Ore. Both are listed in South Africa and represent approximately £10.2 billion in assets. value under the BHP proposal.
The proposal is likely to spark controversy in South Africa ahead of general elections in May.
BHP said Anglo American’s other operations outside copper, iron ore and metallurgical coal – such as the De Beers business – would be “subject to strategic review following completion”.
BHP’s approach to Anglo comes a year after the Melbourne-based mining company completed its A$9.6 billion takeover of Australian rival Oz Minerals, increasing its exposure to copper.
The deal sparked a flurry of deals in the industry, but BHP management has since said it will be disciplined in its approach to mergers and acquisitions, focusing on integrating Oz and financing the development of its potash operations.
BHP abandoned its main listing in London in 2022, simplifying its corporate structure to better prepare it for possible consolidation opportunities following the sale of its oil and gas operations, which merged with Australia’s Woodside the same year.
Anglo, founded 107 years ago, is among the 25 most valuable companies on the London Stock Exchange, and BHP’s proposal is likely to fuel concerns that businesses are fleeing from the British capital.
Some BHP investors said there were too few details on whether the acquisition would appeal to shareholders, but others said it made sense given BHP’s focus on expansion from his copper wallet.
Andy Forster, investment director at Argo Investments, which owns shares in BHP, said the deal would ultimately be judged on its cost. “This makes sense for copper, but as always for large, complex transactions [it is] difficult to achieve without destroying value along the way,” he said.
Christopher LaFemina, an analyst at Jefferies, said in a note that “we would be surprised if this is BHP’s final offer as the price is clearly too low to succeed”, estimating that at least £28 per share would be necessary for serious discussions to occur.
He added that competing bidders could emerge.
Anglo is advised by Centerview, Goldman Sachs and Morgan Stanley. UBS and Barclays are advising BHP on this proposal, according to people familiar with the matter.
Bloomberg first reported that BHP was considering buying Anglo. BHP has until May 22 to make a formal offer.