BHP won't make firm offer for Anglo after latest proposal; deadline extension rejected

Major miner BHP has announced it does not intend to make a firm offer for fellow miner Anglo American after Anglo rejected its latest proposal and its request to extend the deadline for an offer.

BHP CEO Mike Henry said the miner would not be making a firm offer for Anglo, adding that BHP was committed to its Capital Allocation Framework and maintained a disciplined approach to mergers and acquisitions.

"While we believed that our proposal for Anglo American was a compelling opportunity to effectively grow the pie of value for both sets of shareholders, we were unable to reach agreement with Anglo American on our specific views in respect of South African regulatory risk and cost and, despite seeking to engage constructively and numerous requests, we were not able to access from Anglo American key information required to formulate measures to address the excess risk they perceive," he said.

Henry added that BHP still viewed its proposal as "the most effective structure to deliver value for Anglo American shareholders," and was confident that it and Anglo could collaboratively have obtained all required regulatory approvals, including in South Africa.

Earlier on May 29, BHP proposed a series of socioeconomic measures intended to address Anglo's concerns regarding its takeover offer and had requested an extension to 5:00 pm London time May 29 at for BHP to make another offer.

Anglo had rejected three unsolicited, non-binding and highly conditional takeover proposals from BHP, which had valued Anglo at GBP31.1 billion, GBP34 billion and GBP38.6 billion, respectively.

On May 22, Anglo agreed to extend the deadline for a formal offer by one week.

A sticking point in the structure of the deal had been for Anglo to divest its entire shareholdings in two South African miners, namely Anglo Platinum and Kumba Iron Ore.

Anglo had said earlier May 29 that the limited socioeconomic measures put forward by BHP on May 28 did not sufficiently address the fact that Anglo's shareholders would "bear disproportionate execution and value risks and uncertainty over an extended period, nor does it consider that material conditions would likely be imposed in relation to both Anglo American Platinum and Kumba which would require the approvals of their respective boards."

It added that the value risk would only be on Anglo's shareholders and that the deal would erode the value of the shares held by the minority shareholders of both subsidiaries.

Anglo added that the BHP offer was "in clear contrast" to its own simpler standalone plan standalone plan announced May 14 to accelerate value delivery, reiterating that the complex structure of the offer would likely take more than 18 months to implement.

"Throughout the engagements with BHP, BHP continues to restate its belief that the risks of its complex structure are not material, yet has repeatedly and consistently stated both publicly and during the engagements that it is unwilling to amend its proposed structure to assume these risks," Anglo said.

It summarized that BHP had overall not addressed its fundamental concerns relating to the disproportionate execution risk to Anglo shareholders, leading to the board unanimously concluding that there was no basis for a further extension to the deadline.