BHP walks away from takeover talks with Anglo American

Australian mining giant BHP says it is no longer considering a merger with rival Anglo American after confirming it had again discussed a tie-up more than a year after its first failed attempt.

The global resources company headquartered in Melbourne confirmed on Monday that it held talks with Anglo over recent days, overtures that Bloomberg reported on Sunday, citing sources familiar with the matter.

BHP said in a statement that it “continues to believe that a combination with Anglo American would have had strong strategic merits and created significant value for all stakeholders”.

“Following preliminary discussions with the board of Anglo American plc, BHP Group Ltd confirms that it is no longer considering a combination of the two companies.”

The miner said, while it was confident of its own “highly compelling potential” for organic growth, it nonetheless reserves the right to set aside its current position if Anglo’s board agrees to do the same, another bidder makes an offer for Anglo, or if the UK’s panel on Takeovers and Mergers indicates there is a “material change of circumstances.”

John Mills, equity analyst with Morningstar, said the lack of financial detail on BHP’s latest disclosure of talks with Anglo makes it difficult to determine why Anglo’s board had rejected its approach.

“There would have been some sort of figure involved, whether it was shares or cash, or a combination thereof, otherwise it would have been harder for Anglo to just to fob them off,” he said.

BHP, which has a $205 billion market capitalisation, is one of the world’s largest producers of copper, accounting for about 1.9 million tonnes of the sought-after red metal annually.

Copper is a key ingredient in the world’s energy transition away from fossil fuels, with prices and demand soaring over the past decade as miners rush to keep up with rising global consumption.

The renewed tie-up talks between BHP and Anglo American come just months after Anglo, listed on London’s exchange, agreed to plans to merge with Canada’s Teck Resources in a move that will create a global copper-focused heavyweight producing about 1.2 million tonnes annually, a significant rival to BHP.

Anglo and Teck shareholders will vote within two weeks on the $92 billion merger, although the deal will still need approval under the Investment Canada Act.

Mills said shareholder approval for the Anglo Teck deal was likely “a foregone conclusion” but gaining approval from Canadian regulators was a “wild card.”

In May last year, BHP abandoned a $75 billion takeover bid for Anglo American after a tense six-week chase.

At the time, BHP boss Mike Henry flew to London for eleventh-hour meetings following crucial month-long negotiations which resulted in BHP increasing its offer three times before finally convincing Anglo American’s board to engage with its proposal.

The company then dramatically pulled away from making a formal bid after failing to secure an extension to a deadline to commit to a binding offer on terms it could agree to. Its fresh attempt at talks suggest it may have reservations about the previous deal’s lack of success.

The copper tussle comes as BHP is fighting a game of brinkmanship with the Chinese government over the global pricing of its largest commodity, iron ore.

Beijing on Friday expanded its embargo on purchases of a particular blend of BHP’s iron ore as it seeks to control pricing of the key steel-making ingredient using the buying power of the state-run China Mineral Resources Group (CMRG).

Media reports suggest Beijing ordered China’s steel mills and traders to cease purchasing “jingbao fines,” a low grade iron ore which forms a small percentage of the miner’s exports. The ban follows an earlier embargo of another ore blend.

The news was greeted by a fall in the company’s share price, which is down 3.67 per cent over the past five days. But the stock closed slightly higher on Monday to close at $40.46.

BHP and CMRG have been at an impasse over contract negotiations since September.

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