BHP’s bid for Anglo American: A game-changer in copper mining

BHP’s bid for Anglo American: A game-changer in copper mining

BHP Group Ltd. aims to dominate the copper market with a bold proposal to acquire Anglo American Plc, signalling the potential end of an era in mining. Anglo’s struggles in commodity prices and operational setbacks have made it a prime target, especially with its prized copper assets. This move by BHP, valuing Anglo at £31.1 billion, could reshape the industry landscape and trigger a wave of strategic acquisitions amid rising demand for copper in the energy transition.

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By Thomas Biesheuvel and Dylan Griffiths

BHP Group Ltd. has proposed acquiring Anglo American Plc, in a deal that would create the world’s biggest copper producer and spell the end for one of the most storied names in mining.  

The 107-year-old Anglo has long been viewed as a takeover candidate, and a two-year-long slump in its shares has made it a softer target. A combination of plunging commodity prices — for platinum group metals and diamonds — and operational setbacks at key mines made it particularly vulnerable. When Anglo shocked the market in December by curbing its guidance for copper output, potential bidders began to circle. 

A takeover of Anglo would mark a return to large-scale dealmaking for BHP and Chief Executive Officer Mike Henry, who has already transformed the company by getting out of oil and gas.  

1. Why does BHP want to buy Anglo American?

Anglo has a number of businesses, from diamonds to platinum, but the main prize for BHP is copper. Combined with its own, Anglo’s South American copper assets would give BHP about 10% of global mine supply, just as market watchers predict shortfalls. Copper is key to the energy transition and to achieve net-zero carbon emission targets. Annual demand is likely to double to 50 million tons by 2035, according to an industry-funded study by S&P Global. 

2. How much is BHP proposing to pay for Anglo? 

BHP’s proposal valued Anglo at £31.1 billion ($38.9 billion). BHP doesn’t want to buy all of the company, however: It’s proposing first to hand Anglo’s stakes in two South African businesses to the smaller miner’s investors before proceeding with a takeover.

3. Will BHP be forced to sweeten its proposal? 

Some analysts say BHP may need to raise its offer to well above £30 per share to get a deal done, especially if other bidders — such as Rio Tinto Group and Glencore Plc — emerge. Just two years ago, Anglo was trading at almost £43 a share. BHP will also face antitrust scrutiny on a deal that would make it by far the world’s biggest copper producer.

4. What is limiting Anglo’s market valuation?

In addition to major operational and market setbacks over the past year, Anglo’s valuation is limited by the complexity of its business, notably the majority stakes it owns in two South African-listed miners — Anglo American Platinum Ltd. and Kumba Iron Ore Ltd. Its relationship with South Africa goes back more than a century to the foundation of diamond giant De Beers and the mining empire built by the Oppenheimer family. South Africa’s state pension fund — Anglo’s biggest shareholder — has already said the mining sector is of critical importance to the country and that any opportunities that arise need to take this into account. That complex political backdrop, as well as power outages and crumbling infrastructure in the country, may give potential suitors pause for thought as they weigh higher bids.  

5. Is a deal likely to spur further mining takeovers?

The prospect of copper scarcity has led to a flurry of mergers and acquisitions as metal producers look to buy rather than build production growth. BHP’s proposal for Anglo could prompt others to make a move. No. 2 miner Rio Tinto has also been investing in copper production, while Glencore last year made an unsuccessful offer for Teck Resources Ltd., which has a coveted copper business, before eventually reaching a deal for the Canadian company’s coal assets. Mining companies are flush with cash and ready to show investors they have learned from past mistakes in M&A. 

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