BHP (ASX:BHP) share price struggled on Monday despite acquisition talks ‘progressing’

The resources giant’s share price finished the day in the red.

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The benchmark S&P/ASX 200 Index (ASX: XJO) was choppy today whilst the ASX digested a number of catalysts ranging from the Omicron COVID-19 variant to fiscal policy out of the US. 

Shares in resources giant BHP Group Ltd (ASX: BHP) finished the day trading 1.59% in the red at $39.59.

BHP shares started the day in the red and attracted a considerable amount of short interest. This activity came amid a company update regarding its planned acquisition of Noront Resources Ltd, announced in November.

Whilst the announcement wasn’t price-sensitive in any way, BHP went into detail about the moving parts of the transaction and gave a concise update of its status. Let’s take a closer look.

What did BHP announce?

The company advised that its wholly-owned subsidiary, BHP Lonsdale Investments Pty Ltd, is progressing discussions with Wyloo Metals Pty Ltd in support of BHP’s 75 Canadian cents per share offer to acquire Noront Resources.

Noront Resources is focused on the development of high-grade nickel, copper, platinum and palladium deposits and “world class” chromite deposits in Canada, BHP says.

BHP advised today that it is extending the expiry of its offer from 7 pm (Toronto Time) on December 14 2021, to allow more time for those discussions to progress.

As such, the earliest time that BHP will acquire Noront shares under its offer will be at the new expiry time.

Furthermore, pursuant to the extension of the expiry time, BHP Lonsdale and Noront also announced that they have amended the support agreement relating to Noront’s support of the offer.

The pair agreed to do so “in order to extend the “outside date” in that agreement from December 14, 2021 to January 21, 2022”.

BHP says the outside date is important because if certain stipulations haven’t been met by this time, “both Noront and the Offeror become permitted to terminate the Support Agreement”.

This isn’t BHP’s first venture in Canada either ­– it has invested in diamonds, potash, exploration, Carbon Capture and Storage (CCS) research, and environmental preservation throughout its time in America’s northern cousin.

Even though BHP and Wyloo Metals are considering a mutually beneficial arrangement regarding the Noront acquisition, there is no assurance that any agreement will be reached between BHP and Wyloo Metals.

BHP share price snapshot

It’s been a difficult time for BHP shareholders these past 12 months who have seen their holdings slide by 5% in that time.

This year to date, BHP shares have fallen 7% even as commodity prices have delivered strong free cash flow for the company early in CY21.

In the last month, BHP has reversed course however and is now 10% in the green after rallying 3% in the past week.

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The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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