Anglo American stock climbed 5% in London after it turned down BHP Group’s takeover bid Friday.
The British mining company said in a statement that the deal “significantly undervalues” its business, and that the “uncertainty and complexity” of BHP’s offer is “highly unattractive” to Anglo’s shareholders. BHP stock fell by the same amount following Anglo’s announcement.
“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,” Anglo Chairman Stuart Chambers said. “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. “
Melbourne, Australia-based mining firm BHP proposed an all-stock offer to Anglo on April 16 that would require Anglo to give all its holdings of Anglo American Platinum and Kumba Iron Ore — both located in South Africa, where BHP doesn’t operate — to shareholders. The offer was valued at £31.1 billion ($39 billion), comprising 0.71 BHP shares for each ordinary share in Anglo, with a value of £25.08 ($31.36) per Anglo ordinary share.
A merger between the two companies would create the world’s largest miner of copper, with about 10% of the world’s copper mine supply. The metal is a key element used in renewable energy systems and batteries. Last year, BHP acquired copper producer OZ Minerals for roughly $6.4 billion as part of a push to diversify its offerings from oil, gas, and coal.
BHP has until May 22 to make a binding bid — and analysts are expecting it to come back with bigger offers in the coming weeks.
“We would be surprised if this is BHP’s final offer,” analysts from Jefferies LLC said in a note reported by Bloomberg. “We estimate that a price of at least £28/sh would be necessary for serious discussions to take place, and a takeout price of well above £30 per share would be the outcome if other bidders were to get involved.”