BHP Ends New Anglo Takeover Bid After Rejection

BHP.AX +0.62% BHP +0.95% BHPLF +0.91% AAUKF -1.56% NGLOY +2.10%

(Bloomberg) -- BHP Group has walked away from a fresh takeover approach for Anglo American Plc, ending an unexpected and short-lived attempt by the world’s largest miner to thwart a planned tie-up between its smaller rival and Canada’s Teck Resources Ltd.

BHP confirmed on Monday that it had held preliminary discussions with Anglo, but said it was now “no longer considering a combination of the two companies,” and would focus on its own existing portfolio.

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The regulatory statement followed a Bloomberg News report on Sunday that BHP — which had already failed in a bid for Anglo last year — made a new overture in recent days. Anglo rejected that new approach, according to people familiar with the situation, having reviewed the proposal and decided that it was not superior to the combination with Teck. The people asked not to be named as the discussions were private.

BHP’s renewed interest speaks to pressures in an industry eager to add scale and growth, especially in copper, where supply has been dwindling and demand is expected to rise as the world electrifies. Approachable miners with high-quality copper assets are scarce, and their shares are typically more expensive than those of large diversified miners.

The mining giant’s overture comes just weeks before shareholders from Anglo and Teck are scheduled to vote on their own deal to create a company worth more than $60 billion, — effectively putting two long-coveted, copper-rich targets further out of reach.

BHP shares rose as much as 1.3% in Sydney on Monday before paring gains, as investors digested news of the attempt and its abandonment. The stock closed up 0.6%. Anglo American shares whipsawed as markets opened in London, initially rallying 2.6% before giving up gains to trade as much as 2% lower. They were little changed at £27.09 a share as of 8:21 a.m. local time.

The miner’s first proposal had required Anglo to partly break itself up. The latest plan was structured in a simpler way, the people said, and Anglo has since exited its South African platinum business — potentially making it more digestible to BHP.

Still, since BHP’s last dalliance with Anglo ended, its shares have fallen in Australian trading, while the smaller company’s shares have risen about 11% in London. The deal with Teck has also received broad-based support from Anglo investors.

“Maybe BHP thought there was still an opportunity to squeeze in,” said Glyn Lawcock, head of metals and mining at Barrenjoey Markets Pty Ltd. He added that BHP now had to focus on its big-ticket investments — its most ambitious growth program in years — including at the giant Escondida copper mine in Chile, at the Vicuna venture in Argentina and at operations in South Australia.

BHP said in its statement on Monday that it continued to believe that a combination with Anglo “would have had strong strategic merits and created significant value for all shareholders.” But, the company added, it was “confident in the highly compelling potential of its own organic growth strategy.” It did not provide details of any specifics put to the target’s board.

Mining investors are wary of overly complex deals after the excesses of the last cycle, so many will not mourn the loss of a pricey transaction that would have likely given Anglo an even larger share of the combined entity.

Still, investors were caught by surprise on Monday — leaving the company with the task of explaining its volte-face to shareholders, especially after Chief Executive Officer Mike Henry had spent the months since the last takeover attempt reaffirming the company’s focus on its existing assets, said Dylan Kelly, head of research at Terra Capital, which holds BHP stock.

“There are lots of questions surrounding what this means for their new strategy,” he said.

Lazard Inc., UBS Group AG and Barclays Plc acted as advisers to BHP on their latest approach.

Anglo declined to comment. Teck and Anglo shareholders are set to vote on Dec. 9 and the deal still needs the approval of regulators in countries including China, the US and Canada.

--With assistance from Jacob Lorinc, Keira Wright, Sybilla Gross and Robin Paxton.

(Adds Anglo American share price)

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