Iron ore mining in Western Australia.
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Mining giant Anglo American on Friday rejected a takeover bid from rival BHP Group, saying the offer “significantly undervalued” the company and its future prospects.
Australia-based BHP Billiton said on Thursday it had made an all-share takeover bid valuing the smaller company at 31.1 billion pounds ($38.9 billion). According to Reuters analysis, the acquisition will create the world’s largest mining company.
Shares in Anglo American pared losses and fell 0.2% as of 10:20 a.m. in London, while other mining stocks rose.
in a statementThe British miner said board members unanimously rejected BHP’s “unsolicited, non-binding and highly conditional” proposal.
Anglo American chairman Stuart Chambers dismissed the acquisition as “opportunistic”.
He said: “BHP’s proposal is opportunistic and fails to assess Anglo American’s prospects while significantly undermining the relative value upside participation of Anglo American shareholders relative to BHP shareholders.”
BHP did not immediately respond to CNBC’s request for comment.
The offer includes a requirement for Anglo American to divest its entire stake in South Africa’s Anglo American Platinum Ltd and Kumba Iron Ore Ltd, two entities that account for a significant proportion of the company’s copper production.
Stuart Chambers, chairman of Anglo American, said the proposed restructuring was “highly unattractive and would create significant uncertainty, with execution risks borne almost entirely by Anglo American, its shareholders and other stakeholders”.
Anglo American Platinum shares rose more than 2% after the news was announced, while Kumba Iron Ore shares fell 0.9%.
BHP Billiton’s “start”
Mining companies are looking to increase copper supplies in the coming years due to expected copper supply shortages and copper’s key role in the energy transition (it is used in electric vehicles, power grids and wind turbines).
As a result, analysts believe BHP’s bid could be the “starter” of a wider consolidation phase in the industry.
“It’s an opening,” SP Angel partner and mining analyst John Meyer told CNBC’s “Street Signs” on Friday. “It’s like a boxer walking into the ring and warming up.”
Meyer said he expected BHP Billiton to make a new bid for Anglo American or, more likely, Anglo-Australian Mining Company Rio Tinto.
BHP did not immediately respond to CNBC’s request for comment, and Meyer did not elaborate further on the claim.
“I’m not entirely sure Anglo American is the main target they want to pursue,” he said. “I do wonder if BHP might turn its attention to Rio Tinto, maybe later.”
Chinese companies are also likely to enter the sector as they look to provide materials for their vast green manufacturing, he added.
“It’s likely that the Chinese will come in and make a counter-offer. Some Chinese state-owned companies may be welcomed in South Africa,” he said of the Anglo American opportunity.
In its rejection statement, Anglo American said the company was “well-positioned” to benefit from the energy transition.
“Copper accounts for 30% of Anglo American’s total production and, benefiting from orderly and value-added growth options in copper and other structurally attractive products, the Board believes Anglo American shareholders will benefit from the earnings we expect. As the full impact of these trends materializes, values will appreciate significantly,” Chambers said.
—CNBC’s Jenni Reid contributed to this article.
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