Large Anglo Shareholders Back Miner’s Stance on $49B BHP Takeover Talks

Key Takeaway

• Major Anglo American shareholders support the company's push for BHP to modify its $49 billion takeover proposal or compensate for associated risks.
• Concerns include regulatory hurdles in South Africa and the lengthy spinoff process of Anglo's platinum and iron ore units, potentially delaying value realization.
• Investors suggest BHP should cover potential losses from spinoffs or add a cash component to the offer, with some seeing a positive outcome even if BHP walks away.

Shareholder Support for Anglo's Stance

Several major shareholders of Anglo American Plc have expressed support for the company's efforts to persuade BHP Group to modify the structure of its $49 billion takeover proposal or compensate for the associated risks before accepting any offer. Anglo announced on Wednesday that it had rejected a third bid from BHP but agreed to extend a regulatory deadline, giving BHP one week to convince Anglo of the value of its acquisition plan. The discussions will focus on BHP's insistence that Anglo spin off majority stakes in its South African platinum and iron ore units before the takeover can proceed.

Five top-20 Anglo shareholders indicated they were open to the prospect of a deal, with four of them agreeing with Anglo's approach to press BHP for changes to resolve uncertainties created by the proposed multi-phase approach. Most shareholders expressed a desire for BHP to increase its offer, especially if the structure remains unchanged. Under the current plan, Anglo's investors would need to wait for the South African spinoffs to be completed, which some estimate could take up to two years, before realizing the value of the bid.

Regulatory and Structural Concerns

Anglo's main reservation about BHP's current approach is the uncertainty over concessions that may be demanded by South African regulators to approve the demergers of Johannesburg-listed Anglo American Platinum Ltd. and Kumba Iron Ore Ltd. South Africa's Competition Tribunal assesses both antitrust impacts and "public interest" factors, including employment levels and the impact on historically disadvantaged people. Previous approvals have required conditions such as guaranteed local procurement, increased employee ownership, and permanent restrictions on job cuts.

South Africa's state-owned Public Investment Corporation (PIC), which is Anglo's second-largest shareholder with 7.4%, called for a "meaningful revision" to the takeover proposal. The PIC has yet to publicly comment on BHP's third bid or the ongoing negotiations. BlackRock Inc., which owns 10.5% of Anglo, and activist investor Elliott Investment Management, one of Anglo's biggest shareholders, have not commented publicly on their positions.

Investor Perspectives

Some investors suggested that BHP should commit to covering any lost value suffered by the subsidiaries' new owners due to the spinoff process or sweeten the all-share offer with a cash component. Two shareholders who want changes to the deal's structure also mentioned that BHP walking away could still produce a positive outcome. Anglo is planning to exit platinum, diamond, and coal mining to focus on iron ore and copper operations, a streamlining that investors believe could create a more valuable asset if executed well.

Prasad Patkar, head of qualitative investments at Platypus Asset Management, stated, "Anglo is now showing signs of capitulation with the extension. At a price, Anglo is a seller, and at any price, BHP is a buyer. So I think that deal will get done." Ben Cleary, portfolio manager at Tribeca Investment Partners, added, "I would argue with the one-week extension, there is greater likelihood of a deal getting across the line, as Anglo’s board are finally talking."