London-listed miner Anglo American (AAL.L) said on Thursday it had received an all-share buyout proposal from BHP Group (BHP.AX), a deal that would make the world's biggest listed miner also the largest producer of copper globally.
The deal, if agreed, would also trigger further transactions in the global mining industry, which has seen a slew of mergers and acquisitions as companies review their assets to raise exposure to metals deemed critical to the energy transition.
"This is all about copper. BHP becomes the global leader, knocking out Freeport," said Ben Cleary, portfolio manager at Tribeca Investment Partners, which holds shares in BHP and Anglo.
"I think it's a good deal for BHP. Anglo is obviously very much in play now and there’s probably room for others to interlope. This is going to set the whole sector on fire."
The proposal comes after Anglo, which had a market capitalisation of $37.7 billion as of Wednesday's close, began a review of its assets in February after a 94% plunge in annual profit and a series of writedowns due to a fall in demand for most of the metals it mines.
Anglo owns mines in countries including Chile, South Africa, Brazil and Australia.
BHP, best-known for mining iron ore, copper, coking coal, potash and nickel, had a market capitalisation of about $149 billion as of Wednesday.
COPPER IN FOCUS
The deal, if agreed, would allow access to BHP for more copper, one of the most sought after metals for the clean energy transition, and potash, which are its key strategic commodities, as well as more coking coal in Australia.
It would be conditional on being preceded by separate demergers of Anglo's entire holdings in Anglo American Platinum (AMSJ.J) and Kumba Iron Ore (KIOJ.J) to its shareholders, which would significantly lower its exposure to South Africa.
"Anglo is hurt due to its poor South African asset so ripe to be acquired," said Nicolas Van Broekhoven, CrossASEAN Research analyst who publishes on Smartkarma.
The deal could also trigger a wave of transactions for any other unwanted assets such as nickel, manganese and diamonds, where Anglo owns 85% of industry giant De Beers.
"There can be no certainty that any offer will be made nor as to the terms on which any such offer might be made," Anglo American said in a statement, adding the unsolicited proposal is non-binding and highly conditional.
The company said its board was reviewing the proposal and did not disclose the share ratio on offer. Under UK takeover rules, BHP has until May 22 to make a firm offer.
BHP declined to comment when asked about preliminary talks with Anglo, first reported by Bloomberg. The Australian market is closed on Thursday for a public holiday.
Anglo has copper mines in Chile and Peru, countries in which BHP also has operations, and their combined output would amount to around 2.6 million metric tons a year, or about 10% of global production, pushing it well ahead of U.S.-based Freeport-McMoRan (FCX.N) and Chilean state miner Codelco.
Copper prices on the London Metal Exchange have surged 15% this year, approaching $10,000 a ton and two-year highs on demand hopes sparked by encouraging macroeconomic data, U.S. rate cut bets and speculative trading.
Supply bottlenecks driven by the forced December shutdown of Cobre Panama, one of the world's largest open-pit copper mines, are also fuelling the gains.
Anglo's 2024 copper production guidance is 730,000 to 790,000 tons. BHP is targeting copper production of between 1.7 million and 1.9 million tons for the 12 months ending in June.
If the Anglo American deal came to fruition, it would be the second major acquisition for BHP in about a year after its 2023 purchase of Oz Minerals.
The proposal comes as BHP Chair Ken MacKenzie approaches the final stretch of a nine-year term at the miner he has steered since 2017.
More broadly, M&A activity has registered an uptick in the first few months of this year, including mega deals.
($1 = 1.5396 Australian dollars)
