BHP Group Ltd., the world's largest mining company, has made a takeover offer to its competitor, Anglo American Plc. This move may trigger the largest restructuring in the industry in over a decade.
Anglo American Resources Group announced on Wednesday evening that it has received an all stock merger proposal from BHP Billiton. The company added that BHP's condition is for Anglo American Resources to first spin off its platinum and iron ore businesses in South Africa.
BHP Billiton has valued Anglo American Group at £ 31.1 billion (approximately $38.8 billion), a 15% premium to its market value of £ 27 billion (approximately $33.7 billion).
If this transaction is successful, it will mark the completion of BHP Billiton's first large-scale acquisition in many years. In the past few years, under the leadership of CEO Mike Henry, BHP has reignited its interest in transformational acquisitions.
Attractive copper mining business with British and American resources
Anglo American Group has a large copper mining business in South America and a deep presence in South Africa, including platinum, iron ore, and diamonds. It owns 85% of the world-renowned "Diamond King" De Beers. In recent years, copper has become an important metal for energy transformation and electrification. The demand for copper ore is steadily increasing, and prices are also rising due to tight supply.
However, over the past year, Anglo American's stock price performance has still lagged behind its competitors, mainly due to a significant drop in its diamond business.
Due to the shrinking market value, Anglo American Resources has always been seen as a potential acquisition target by large mining companies, especially as most companies in the industry are eager to increase copper reserves and production.
However, despite Anglo American's attractive copper mining business, some buyers have been deterred by its complex internal structure and commodity portfolio, especially its other businesses in South Africa except for copper mines.
Can the largest copper miner be born?
It can be seen from BHP Billiton's merger proposal, which is based on the premise of divesting its platinum and iron ore businesses in South Africa, that BHP Billiton's plan to acquire Anglo American resources is in favor of the latter's copper resources.
Analysts believe that if BHP Billiton and Anglo American ultimately succeed in forming an alliance, they will create the world's largest copper miner as the demand for new energy approaches.
BHP Billiton's copper production in 2023 is approximately 1.2 million tons, while Anglo American's production is 826000 tons. If the two are merged, the merged group will occupy approximately 10% of the global mining supply.
Christopher LaFemina, an analyst at Wall Street investment bank Jeffrey, believes that if BHP is indeed interested in continuing to seek this deal, then we believe there will be other bidders appearing.
Jeffrey's valuation of Anglo American Resources Group is $42.6 billion, 28% higher than its current market value. The bank believes that only by reaching this price can the transaction "cross the finish line".
Currently, BHP Billiton is listed in both London and Sydney, with a market value of approximately $149 billion.
In addition, Jeffrey also pointed out that antitrust "may be a problem" as governments around the world view copper as a strategic mineral.
Anglo American Resources Group stated in its latest statement that its board of directors is reviewing the proposal.
According to a recent media report on Thursday (April 25th), insiders revealed that Anglo American Resources is considering selling its diamond business unit, De Beers. This is the latest progress that has occurred since BHP Billiton's acquisition proposal was issued.