By Melanie Burton, Clara Denina and Roshan Thomas
MELBOURNE/LONDON (Reuters) -BHP on Monday abandoned a last-ditch effort to buy rival Anglo American and bolster its dominance in copper, just two weeks before Anglo and Teck Resources’ shareholders were set to vote on a $60 billion merger.
BHP said it would no longer pursue a potential combination with Anglo after preliminary discussions with the board. It made the announcement in a release to Australia’s securities exchange after news broke of the talks on Sunday.
The world’s biggest listed miner said it still believed a tie-up with Anglo would have delivered “strong strategic merits”, but added it was confident in its own growth plans.
A source close to the companies said BHP made its latest approach late last week, offering a deal consisting largely of shares and a small cash component. After Anglo rejected the proposal, both parties agreed to keep the details confidential.
“It’s a last throw of the dice for BHP,” said portfolio manager Andy Forster at Argo Investments in Sydney, which holds BHP shares.
“I’m a bit surprised that, given the relative performance that they thought they’re in a position to come back and do another deal and extract value for shareholders.”
The failed approach underscores a broader trend in the mining sector, where major players have been pushing to consolidate amid rising demand for metals critical to the energy transition. Copper, in particular, has become a prime target as producers seek scale and efficiency in the face of tightening supply and the costly hunt for new deposits.
Anglo’s shares, which have rallied around 16% this year, opened 2% higher in London, before clawing back gains. BHP shares rose 0.4% on Monday.
COPPER GIANT
BHP saw Anglo as a way to shore up its dominance in copper. While it remains the world’s top producer, its lead is narrowing in the years ahead without significant new projects.
Its decision to walk away comes ahead of votes by Teck and Anglo shareholders set for December 9 to create Anglo Teck, a copper giant with big development projects in Chile and Peru.
“A BHP bid for Anglo would have frustrated that deal, but with BHP now stepping away, it appears that the interloper risk for Anglo has materially reduced and the Anglo/Teck Resources deal is likely to go ahead, assuming approvals are received,” said Berenberg analysts.
Under UK securities rules, BHP’s statement means it cannot make another bid for Anglo for six months.
“There’s probably a handful of times when assets like this are up for sale, so BHP may as well assess if the option is open. But it does look a little messy,” said Kaan Peker, analyst with RBC Capital Markets.
BHP’S ORGANIC GROWTH
After Anglo rebuffed three approaches from BHP last year, the Melbourne-based miner pivoted to smaller projects, including in Argentina, where it said it saw better value.
As recently as August, CEO Mike Henry dismissed the idea of another tilt at Anglo.
“Frankly, in current markets, it’s hard to see the right combination of the commodities that we like, the asset quality that we like, at a price where we can still unlock attractive value for BHP shareholders,” he said on a results call.
One investor said BHP’s focus on capital discipline under former chairman Ken MacKenzie was the main reason the company did not pay more for Anglo, which had led to some internal reflection. The latest approach came under BHP’s new chair, Ross McEwan.
OTTAWA WANTS NATIONAL CHAMPIONS
The Anglo Teck deal still needs approval under the Investment Canada Act.
While the merged company will be headquartered in Canada, Ottawa wants Anglo American to redomicile – that is, change its country of incorporation – to Canada, a shift that Anglo CEO Duncan Wanblad has firmly ruled out.
Anglo, which had no immediate comment, has worked hard to improve its share price since it rebuffed BHP’s final $49 billion offer in May last year.
It has unveiled a sweeping restructuring plan that Wanblad said would deliver stronger returns for shareholders, despite its failure to offload its Australian coal assets.
(Reporting by Roshan Thomas, Melanie Burton, Clara Denina; Additional reporting by Divya Rajagopal in Toronto, Scott Murdoch in Sydney; Editing by Diane Craft and Sonali Paul)
