BHP shares fall again after Anglo American rejects takeover offer

The Big Australian's offer 'significantly undervalues' the miner.

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BHP Group Ltd (ASX: BHP) shares are falling again on Monday morning.

At the time of writing, the mining giant's shares are down 0.5% to $42.97.

Why are BHP shares falling?

BHP shares are falling for a second session in a row following a selloff on Friday. That sell-off was driven by a negative reaction to news that the Big Australian had tabled a ~A$60 billion non-binding takeover offer for Anglo American plc (LSE: AAL).

Although the deal would make the combined entity the largest copper miner in the world, the market didn't appear keen on the deal and investors were quick to hit the sell button.

BHP's shares are falling again this morning after Anglo American rejected its offer.

According to the release, the global miner's board has considered the proposal with its advisers and concluded that it "significantly undervalues" Anglo American and its future prospects.

In addition, it highlights that the proposal contemplates a structure that the board believes is highly unattractive for Anglo American's shareholders, given the uncertainty and complexity inherent in the offer, and significant execution risks.

'Opportunistic'

The decision to reject the offer was unanimous, according to Anglo American chair, Stuart Chambers. He revealed that the board believed the offer was opportunistic and undervalues the company's prospects. Chambers commented:

Anglo American is well positioned to create significant value from its portfolio of high quality assets that are well aligned with the energy transition and other major demand trends.

With copper representing 30% of Anglo American's total production, and with the benefit of well-sequenced and value-accretive growth options in copper and other structurally attractive products, the Board believes that Anglo American's shareholders stand to benefit from what we expect to be significant value appreciation as the full impact of those trends materialises.

The BHP proposal is opportunistic and fails to value Anglo American's prospects, while significantly diluting the relative value upside participation of Anglo American's shareholders relative to BHP's shareholders.

The proposed structure is also highly unattractive, creating substantial uncertainty and execution risk borne almost entirely by Anglo American, its shareholders and its other stakeholders. Anglo American has defined clear strategic priorities — of operational excellence, portfolio, and growth – to deliver full value potential and is entirely focused on that delivery.

In light of the above, Anglo American shareholders were advised to take no action in relation to the proposed offer.

No BHP response

As things stand, BHP has not revealed whether it plans to come back with an improved offer.

However, based on how its shares are performing this morning, it seems that some investors are a touch nervous that a higher offer will be made to try and secure a deal for its rival.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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 Scott Phillips.

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