The world's largest acquisition of the year is coming?
Australian-based BHP Billiton (BHP) said on Thursday that it proposed to buy rival Anglo American for 31.1 billion pounds (281.8 billion yuan), which is valued at about $39 billion (282.4 billion yuan), according to analysts' calculations. At the same time, British mining company Anglo American also confirmed that it had received BHP's initiative to propose a wholly-share merger. Anglo American's share price rose 16.10% local time on Thursday, with its latest market capitalization reaching £34.2bn.
If the acquisition goes through, BHP's acquisition of Anglo American is likely to be the world's largest acquisition this year, surpassing Capital One Financial Corp. $35 billion acquisition of Discover Financial Services.
What does BHP Billiton like?
BHP Billiton is a mining resources company whose main business includes the extraction and processing of minerals and oil. Headquartered in Melbourne, Australia, the company operates in many countries around the world. BHP Billiton has a significant market position in the iron ore, copper, coal and oil sectors, and is committed to efficient and sustainable resource extraction.
Anglo American will be spun off under BHP's proposal, which would require Anglo American to divest its platinum and iron ore operations in South Africa. All other divisions, including De Beers Diamonds, will also be subject to a strategic review. If the acquisition is successful, BHP's biggest gain will be to seize Anglo American's prized copper mines and strengthen its position in the iron ore and metallurgical coal sectors.
At present, the world's miners are unabashedly interested in developing copper mines. With surging demand from the renewables, artificial intelligence industries, the highly conductive metal is expected to see a severe shortage in the coming years, and executives in the industry are understood to be betting on soaring prices in the coming years. BHP Billiton also wants to complete the acquisition ahead of the rise in copper prices, which BHP said would benefit the company's operations at Anglo American's copper mines in Chile and Peru.
The timing of the acquisition is also delicate. Anglo American's share price suffered its worst one-day drop in 15 years in December due to a sharp downward revision of production forecasts. Prior to the acquisition proposal, Anglo American's stock underperformed its industry rivals.
The dark blue line shows the performance of Anglo American stocks. Source/LSEG
Analysts said the value of Anglo American's copper business was offset by its other large businesses, notably De Beers' diamond division and platinum division, which had been underperforming. According to foreign media reports, BHP Billiton and a major shareholder of Anglo American said: "This timing is not surprising considering that Anglo American is reviewing and adjusting its business. ”
Jefferies analyst Chris Lafermina estimates Anglo American's projected earnings for 2025 at $7.6 billion, excluding the two South African divisions that could be divested.
It is understood that BHP Billiton and Anglo American have copper mines in Chile and Peru, and when the two companies' businesses are geographically very close, mining mergers and acquisitions can save a lot of costs. BHP Billiton has stated: "The acquisition can create meaningful synergies through shared sourcing and the elimination of duplication of construction at the mine. ”
Anglo American is making a counter-offer
On April 25, local time, according to Reuters, citing people familiar with the matter, Anglo American believes that BHP's £31.1 billion offer is unattractive, and the proposal does not solve the complexity of Anglo American's divestment of its platinum metal and iron ore business in South Africa. Anglo American management does not see BHP's £31.1bn offer as attractive and BHP must make a more attractive offer by May 22, according to two people familiar with the matter.
Industries such as new energy vehicles and artificial intelligence currently need copper, and analysts estimate that the proposed acquisition would create a company that produces about one-tenth of the world's copper. Anglo American simply said it would review the offer, but did not elaborate.
BHP's offer comes as Anglo American is reviewing its business in response to a 94% drop in annual profit and a flurry of issues related to lower commodity revenue.
Ben Davis, an analyst at Liberum, said: "BHP's offer may not be enough, Anglo American's assets may be better suited to other mining companies, and this offer is not enough to get the board or shareholders to cross the bottom line." ”
The stock price has fallen by nearly 40% in two years, what happened to Anglo American?
When former boss Mark Coutnowani left Anglo American in mid-April 2022, the century-old miner's share price also reached an all-time high. Metal prices soared as lockdowns were lifted around the world, which led Anglo American to post its best annual profit ever. Two years later, however, Anglo American's share price is down 38.7% from its all-time high.
According to earlier reports, a few days after the departure of the current boss, Anglo American announced that its mine had suffered a major setback and that production would decline. Problems across the portfolio also multiplied, with Anglo American saying at the time that the flagship fertiliser project it had purchased a few years ago experiencing a cost blowout. For an otherwise reliable company, the seeds of all the troubles were planted at that time.
Since then, the troubles have continued to pile up, with many issues beyond Anglo American's control – the collapse of the diamond market, the collapse of platinum prices, and rail and port problems in South Africa have affected the export of the company's iron ore business. Anglo American is the only major miner with a large platinum and diamond business, particularly in South Africa, which means that their competitive advantage has become a problem for them.
In December 2023, Anglo American said its core business, South American copper mines, would need to cut production by about 20% to reduce costs. The company's shares plunged 19% on Dec. 8, its worst one-day drop in 15 years.
After a series of headwinds, Anglo American tried to turn the tide and informed investors that the company was reviewing all operations. Anglo American is willing to sell De Beers Mining and find a partner for a large fertiliser project. The company with copper mines has suddenly become very vulnerable, and for BHP, the Anglo American crisis may have come at an opportune time.
Ben Davis said: "A few years ago, Anglo American was the most popular stock. The continuous negative news and the poor performance of its commodities business make it vulnerable to attack. ”
Editor-in-charge: Luo Xiaoxia
Proofreader: Liu Rongzhi