BHP shares on watch after new $64b Anglo American takeover offer rejected

It wasn't second time lucky for the Big Australian. Will it try again?

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BHP Group Ltd (ASX: BHP) shares will be in focus on Monday.

That's because it has just been revealed that the mining behemoth has made a new takeover offer for Anglo American plc (LSE: AAL).

As a reminder, late last month the Big Australian tabled a non-binding offer of:

  • 0.7097 BHP shares per Anglo American share,
  • And ordinary shares in Anglo American Platinum and Kumba Iron Ore (which would be distributed by Anglo American to its shareholders in direct proportion to each shareholder's effective interest in Anglo Platinum and Kumba)

This was swiftly rejected by its target on the belief that the offer undervalued the company and was opportunistic. Anglo American's chair, Stuart Chambers, explained:

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.

New offer

Overnight, Anglo American Mining revealed that it has received another offer from BHP.

It notes that the structure of the latest proposal is unchanged and comprises an all-share offer.

What has changed is the amount of BHP shares that are being put on the table. The new offer is as follows:

  • 0.8132 BHP shares per share, and
  • Ordinary shares in each of Anglo American Platinum and Kumba Iron Ore

This values Anglo American Mining at GBP34 billion or A$64 billion.

Second rejection

Unfortunately for BHP, the copper miner has also rejected this latest offer. Once again, its board believes the proposal significantly undervalues its business.

Chambers commented:

The latest proposal from BHP again fails to recognise the value inherent in Anglo American. Anglo American shareholders are well positioned to benefit from increasing demand from future enabling products while the increasing capital intensity to bring greenfield supply online makes proven assets with world class resource endowments ever more attractive. The Anglo American team is focused on delivering against its strategic priorities of operational excellence, portfolio simplification and growth and is set to accelerate delivery in order to unlock this inherent value.

Anglo American also dislikes the structure of the proposal, which was unchanged from the last offer. The chairman adds:

The BHP proposal also continues to have a highly unattractive structure. This leaves Anglo American, its shareholders and stakeholders disproportionately at risk from the substantial uncertainty and execution risk created by the proposed inter-conditional execution of two demergers and a takeover.

What's next?

BHP has yet to comment on the offer and its rejection.

Nor has there been any comment on whether the miner will try to make it third time lucky. But given its determination to boost its copper exposure, it wouldn't be surprising to see BHP return with an improved offer.

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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