Anglo American rejects BHP’s $39 billion takeover bid to form mining juggernaut

In Europe

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Iron ore mining in western Australia.

Cuhrig | E+ | Getty Images

Mining giant Anglo American on Friday rejected a takeover bid from rival BHP Group, saying the offer “significantly undervalues” the company and its future prospects.

Australia-based BHP on Thursday said it had made an all-share takeover offer which valued the smaller company at £31.1 billion ($38.9 billion). The takeover would have created the world’s largest mining company, according to a Reuters analysis.

Shares of Anglo American pared losses to trade down 0.2% by 10:20 a.m. London time, while other mining stocks rose.

In a statement, the British miner said that board members had unanimously rejected BHP’s “unsolicited, non-binding and highly conditional” proposal.

Anglo American’s Chairman Stuart Chambers dismissed the bid as “opportunistic.”

“The BHP proposal is opportunistic and fails to value Anglo American’s prospects, while significantly diluting the relative value upside participation of Anglo American’s shareholders relative to BHP’s shareholders,” he said.

BHP did not immediately respond to a CNBC request for comment.

The offer had included a requirement for Anglo American to demerge its entire shareholdings in South Africa-based Anglo American Platinum Limited and Kumba Iron Ore Limited, two entities which together account for a sizeable proportion of the company’s copper production.

Anglo American Chairman Stuart Chambers said the proposed restructure was “highly unattractive, creating substantial uncertainty and execution risk borne almost entirely by Anglo American, its shareholders and its other stakeholders.”

Shares of Anglo American Platinum rose more than 2% on the announcement, while Kumba Iron Ore moved 0.9% lower.

BHP’s ‘opening shot’

Mining firms are seeking to shore up copper supplies in the years ahead, owing to projected shortages and the metal’s key role in the energy transition, with uses in electric vehicles, power grids and wind turbines.

Analysts believe that BHP’s bid could therefore be an “opening shot” in what looks set to be a broader phase of consolidation within the sector.

“This is an opening shot,” John Meyer, partner and mining analyst at SP Angel, told CNBC’s “Street Signs” on Friday. “This is like a boxer walking into the ring and just warming up.”

BHP could aim for Rio Tinto after Anglo American rejects takeover offer, analyst says

Meyer said he expects BHP may present a fresh bid for Anglo American or, perhaps more likely, British-Australian miner Rio Tinto.

BHP did not immediately respond to CNBC’s request for comment, nor did Meyer expand on the claim.

“I’m not entirely sure that Anglo American is the main target that they want to go for,” he said. “I do wonder whether BHP might turn its attention to Rio Tinto, perhaps later on.”

He added that Chinese firms are also likely to enter the ring, as they look to shore up materials for their vast green manufacturing.

“Quite possibly the Chinese are going to come in and make a counter bid. Some China state company would probably be quite welcome in South Africa,” he said of the Anglo American opportunity.

Anglo American said in its rejection statement that the company was “well positioned” in its current state to benefit from the energy transition.

“With copper representing 30% of Anglo American’s total production, and with the benefit of well-sequenced and value-accretive growth options in copper and other structurally attractive products, the Board believes that Anglo American’s shareholders stand to benefit from what we expect to be significant value appreciation as the full impact of those trends materialises,” Chambers said.

— CNBC’s Jenni Reid contributed to this article.

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