Anglo American rejects BHP’s third bid, extends deadline

Quellaveco copper mine, in Peru. (Image courtesy of Anglo American | Flickr.)

Anglo American (LON: AAL) rejected on Wednesday a third takeover bid by BHP (ASX: BHP) that valued the company at $49.2 billion (£38.6bn), but it has agreed to extend the deadline for the world’s largest miner to make a formal offer.

BHP now has until May 29 at 5pm GMT time to table a binding bid for its smaller rival, which is simultaneously working on a radical business overhaul that will see it divest its less profitable coal, nickel, diamond and platinum units.

The latest, already rebuffed offer valued Anglo American’s shares at £29.34 based on the April 23 closing price. The figure represents a 47% premium on the stock value, BHP said.

“BHP has put forward a final offer that would provide Anglo American shareholders with 17.8% of a combined BHP and Anglo American,” chief executive Mike Henry said.

“The revised proposal is underpinned by BHP’s disciplined approach to mergers and acquisition and our focus on delivering long term fundamental value,” Henry noted.

Anglo American said its board continued to have serious concerns with the structure demanded by BHP, as “it is likely to result in material completion risk and value impact that disproportionately falls on Anglo American’s shareholders,” it said.

BMO analyst Alexander Pearce noted that while BHP’s third offer isn’t a formal one, and it has already been rejected, the deadline extension would suggest that there is an “increased likelihood” that a deal can be reached between the two companies.

“The revised offer ratio is already at the top end of what BHP could pay to avoid dilution on an earnings before interest, taxes, depreciation, and amortization (EBITDA),” Pearce wrote in a note to investors on Wednesday.

Earlier in the day, South African state-owned asset manager the Public Investment Corporation (PIC), which is Anglo American’s second largest investor, asked the target company to perform a “meaningful revision” of BHP’s proposals.