BHP investors support decision to walk away from Anglo American deal

BHP’s decision to walk away from a £39bn bid for rival Anglo American has been welcomed by some of its investors in Australia as the spotlight shifts to whether its UK-listed target can deliver on its restructuring plan.

Anglo American refused to give BHP more time on Wednesday to make a formal offer, resulting in the collapse of the miner’s six-week takeover attempt.

Anglo American, which dismissed BHP’s offer as “highly complex and unattractive”, has proposed an alternative plan to break itself up, which includes spinning off two of its South African businesses.

Under London stock market rules, BHP has to wait six months before it can approach Anglo again, unless it is invited to do so by the UK company or another bidder emerges.

Glyn Lawcock, an analyst with investment bank Barrenjoey, said investors were pleased that BHP’s management team had exercised discipline by not raising its offer higher to win approval from Anglo’s board.

He said the pressure was now on the UK-listed company to prove that it could bridge the gap between BHP’s offer and its own valuation.

“Six months is not a long time. This is a very long game,” said Lawcock about the bid. He suggested BHP might be taking a “time out” and could launch another bid in the future.

BHP chief executive Mike Henry had his sights set on Anglo’s prized copper business, a metal critical to the energy transition. “It’s a 30-year play. You’re setting the company up for the next generation,” said Lawcock about BHP’s strategy.

Matthew Haupt, portfolio manager at Wilson Asset Management in Sydney, which holds BHP shares, said he expected the world’s largest miner could come back with a new bid in six months if Anglo did not show rapid progress in delivering on its own plans.

“There’s no room for error. The blowtorch is on them,” he said of Anglo’s management.

Haupt added that investors approved of the Australian company’s management’s strategy. “They had a crack and exercised discipline,” he said. “I’d rather they walked away now rather than doing something stupid like going hostile.”

“BHP put its best forward,” said Kaan Peker, an analyst with RBC Capital Markets. “It’s not necessarily over. If Anglo American trades back to the pre-bid levels then there will be a lot of questions.”

Shares in BHP opened 1.5 per cent lower in Australia. Analysts said the drop reflected a wider sell-off in mining stocks, rather than a judgment on BHP’s strategy.

Investors will return their focus to BHP’s organic growth plan, including its delivery on a major copper project in South Australia following its acquisition of Oz Minerals.

Anglo’s plan includes selling its coal assets in the north of Australia and a stake in a manganese business in the Gulf of Carpentaria, along with hiving off of its South African platinum business and the De Beers diamond mining company.