BHP Group (BHP.AX) on Wednesday asked for more time to try to win over takeover target Anglo American (AAL.L), hours before a deadline for the world's biggest miner to firm up its $49 billion offer for its smaller rival.
Anglo has rejected three proposals from BHP but last week agreed to a one-week extension to a deadline from Britain's takeover watchdog for BHP to make a formal offer or walk away.
In a statement to Australia's securities exchange, BHP said it was ready to offer a break fee to Anglo if the deal was blocked due to antitrust reasons or failed to get regulatory approval, saying it was sure it had quantified and managed such risk.
It also announced a series of steps aimed at addressing concerns over its condition that Anglo divest some South African assets before a takeover can go ahead - one of the main sticking points in the talks.
"Today's announcement says to me that BHP are doing all they can to placate any concerns Anglo's board could have from a South Africa jobs, and regulatory point of view," said analyst Hayden Bairstow of broker Argonaut in Perth.
"This is them saying, 'Can we just extend this for another week, and lock it all up?' and I think that is what will happen."
Anglo was founded in Johannesburg in 1917 and employs more than 40,000 South Africans, so any withdrawal would be a further economic blow to the country whose miners have been cutting jobs and investment as platinum especially falls out of favour.
JP Morgan analysts have estimated a takeover of Anglo by BHP could lead to outflows of $4.3 billion from South Africa and weaken the rand.
BHP said on Wednesday it would make socio-economic commitments to South Africa that include sharing costs related to increased employee ownership of Anglo's assets there, as well as maintaining employment levels at Anglo's Johannesburg office.
OPTIONS
Anglo last week gave BHP a seven-day extension until 1600 GMT on Wednesday to its original May 22 deadline to submit a binding offer, after rejecting a third takeover proposal it deemed too difficult to execute.
Anglo had no immediate comment when contacted by Reuters.
If Anglo does not agree to an extension, BHP will have to walk away or wait six months to make another approach - unless a rival bidder emerges - once the deadline expires.
BHP's shares closed flat on Wednesday at A$45.08 a share. Anglo's were down 1.4% at 25.23 pounds by 0753 GMT.
BHP's last-minute request comes after the miner had struggled to find common ground with Anglo by Tuesday, five sources told Reuters, with no new concessions granted on structure or value.
BHP CEO Mike Henry has stood firm on the structure and value of its latest takeover proposal, focusing instead on allaying concerns around execution risk.
That risk includes Black empowerment provisions in South Africa that include local ownership stakes and assurances around employment security for workers in a nation with a jobless rate of over 30%, making it a key election issue.
There was also contention around whether there are sufficient buyers for Anglo's 69.7% stake in Kumba Iron Ore (KIOJ.J) and 78.6% stake in platinum miner Amplats, said an investor who declined to be identified as the subject was sensitive.
"Although the measures announced today should mitigate some of the risks associated with the deal structure, the release does not quantify the cost associated with them making it difficult to assess the value included BHP's offer," RBC Capital Markets analysts said in a note.
"Anglo is unlikely to accept last week's offer unless the structure changes or a higher compensation is offered," RBC said, adding the market expects a further extension will be granted.
Initial impressions from BHP investors were that it was more important for the miner to maintain capital discipline, so that a failed takeover attempt would not tarnish Henry's reputation.
"I would be happy for BHP to walk away if negotiations can't progress in a good-faith manner; as much as I'd love to see the merger proceed, I think some discipline here is warranted," said Wilson Asset Management lead portfolio manager Matthew Haupt, a BHP shareholder.
"I think BHP have acted in good faith and put forward a solid proposal and now it's up to Anglo to engage and get a deal done."
($1 = 0.7845 pounds)
