A shock proposal for a mega-merger in the mining sector raised the prospect of one of the biggest City deals in years today, and brought with it the threat of the FTSE 100 losing one of its largest companies.
Anglo American, the metals multinational, was at the centre of a £31 billion approach from BHP of Australia, which scrapped its own London listing in 2021.
The deal would bring Anglo’s copper production in Chile and Peru under the control of the antipodean giant, already biggest miner in the world. Demand is expected to soar, as copper drives the transition away from fossil fuels via increased electrification.
Anglo’s earnings from copper alone hit $3.2 billion in 2023, almost a third of the total for the group, which is in the top quarter of the FTSE 100 by market value.
BHP is more dependent on iron ore and has been burnishing its position in the copper market by buying up producers. The Melbourne-based firm paid around around £5 billion for local rival Oz Minerals a year ago.
That would be dwarfed by the all-stock offer for Anglo, priced at 2508p per share. The stock soared toward that today, adding 285p to 2489p. It had ended the previous trading session at 2205p. But the stock has fallen by over a third since the start of 2023, hit by cuts to production forecasts, including in December.
In the wider mining sector, with copper in the spotlight, shares in Chilean producer Antofagasta gained 50p to 2216p. But the firms that would be the main rivals to any combination of BHP and Anglo American slipped. Rio Tinto was down 59p at 5391p and Glencore was over 3p lower at 471p.
Andrew Keen, an energy and resources sector specialist at City investment research firm Edison, expected the bid to stoke further action: “This puts Anglo firmly into play and may attract other offers from other mining majors”.
He added: “Premiums for successful M&A in large cap mining are often in the order of 30%. Anglo has had a spate of operational issues recently and now needs to argue it is the best owner of its assets. If an alternative bidder emerges, it’s likely the debate will switch to the value of the competing offers.”
BHP’s market value on the Australian stock exchange is the equivalent of around £120 billion. Its approach comes after Anglo’s management has faced pressure following the reduced output forecasts.
Anglo confirmed it was “reviewing” the approach “with advisers”, calling the offer “unsolicited, non-binding and highly conditional”. Its chief executive, Duncan Wanblad, leads around 60,000 employees globally, with just under 3,000 in Europe, including in the London head office.
The terms include the spin-off of Anglo’s South African business, focused on platinum. That is likely to provoke political controversy there in an election year. Anglo also owns the De Beers diamond miner.
BHP is run by CEO Mike Henry, who has warned against over-paying for mergers and acquisitions in the past.
Neil Wilson, chief market analyst at the broker Finalto said: “Henry has previously said he will take a disciplined approach to M&A [but] bulging coffers thanks to bumper profits in recent years may test that resolve. Long term mega trends suggest demand for metals is only going to increase.”
He pointed out that the deal “would create the world’s largest listed miner and copper producer”, and concluded: “Let’s face it, this is monster.”
