Duncan Wanblad is trying an unconventional form of defence. The Anglo American (AAL.L) boss on Tuesday unveiled plans to shed assets including coal, diamond, nickel and platinum – a strategy that he reckons will serve investors better than a proposal from Australian suitor BHP (BHP.AX). Wanblad may be right. But if the plan flops, a takeover looks possible further down the line anyway.
The London-listed miner announced its self-help strategy a day after rebuffing BHP’s second approach, which gave the target a price tag of $43 billion, using undisturbed prices. Under that rejected deal, Anglo would first have to spin off its stakes in South Africa-listed iron ore and platinum groups, and then merge itself into BHP.
Instead, Wanblad’s new plan would see Anglo either sell or spin off four different businesses that he now considers peripheral, leaving the group focused on the more attractive copper market and high-quality iron ore. He’ll also aim to cut at least $800 million of annual costs.
The Anglo breakup plan could be more valuable to shareholders than what BHP is proposing. The three material businesses that Wanblad is contemplating offloading could have a combined enterprise value of almost $17 billion. That’s using the share price for public Anglo American Platinum (AMSJ.J), listed peer multiples for steelmaking coal, and Jefferies analysts’ mark for the De Beers diamonds division.
After the disposals, Anglo investors would be left with a copper unit worth $36 billion based on peer trading multiples, a $6.7 billion stake in listed Kumba Iron Ore (KIOJ.J), a further $5.8 billion of Brazil’s iron ore assets using peer multiples, and a $3 billion UK fertiliser business based on estimates by analysts at RBC Capital Markets.
Add those enterprise values to the three exited businesses, and the total would be $68 billion. Deduct $10.6 billion of debt and apply a 20% haircut to reflect any lingering conglomerate discount on Anglo, and the implied equity value is $45.5 billion, which is 7% higher than BHP’s plan using undisturbed prices. Anglo’s standalone strategy may also be less politically sensitive in South Africa, since Wanblad wants to stick around as the main shareholder in Kumba Iron Ore.
It’s also possible that Wanblad’s strategy falls short, for example if he gets a bad price for the coal business or De Beers. Even then, investors will have few regrets. Anglo will be slimmed down and much less complicated, making a takeover by BHP or anyone else much smoother in the future. As long as BHP isn’t offering anything firm in the form of cash, Wanblad’s investors should be happy to keep their options open.
Follow @karenkkwok on X
CONTEXT NEWS
Anglo American on May 14 announced an overhaul of its business after rejecting takeover interest from Australian rival BHP.
The London-listed miner plans to divest its steelmaking coal assets, spin off its platinum unit in South Africa, explore options for its nickel mines, and either divest or demerge its diamond business De Beers.
Anglo said it will slow the development of its Woodsmith fertiliser project in northeast England and look for strategic partners while also cutting capital expenditures.
The strategic shakeup will also see Anglo cut $800 million in costs a year from the end of 2025.
BHP said on May 13 that Anglo American had rejected a revised buyout offer valuing the company at 34 billion pounds ($42.7 billion). BHP made the new proposal on May 7. It included the condition that Anglo must spin off its publicly listed South African units before the acquisition.
Anglo American’s shares fell 3.2% to 26.21 pounds as of 0918 GMT on May 14. Anglo American Platinum’s Johannesburg-listed shares were down 7% while Kumba Iron Ore shares were up 4.6%.
