BHP puts takeover plans for rival miner Anglo American on ice

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BHP has cooled back with another bid for rival miner Anglo American, according to people close to the company, with Anglo’s share price rising making a deal too expensive for the Australian group.

London-listed Anglo launched a radical restructuring plan last year, amid BHP’s ultimately failed £39bn takeover attempt, to divest its coal, platinum and diamond businesses which was well received by investors.

Australia-based BHP is closely monitoring Anglo’s progress but believes the miner’s shares have become too expensive to justify a new bid in the near term, according to three people close to the situation.

Anglo’s share price has risen 40 percent in the past 12 months, while BHP’s share price has fallen 17 percent over the same period on the back of lower iron ore prices and a weak Chinese real estate market.

“On the face of it, if BHP was bidding what they thought was a fair price, it’s hard to see why they would bid more now,” said George Cheveley, fund manager at Ninety One, an investment manager.

Anglo’s ambitious restructuring plan will create a smaller company in terms of revenue but one that is more focused, generating 54 percent of its revenue from copper and the rest from iron ore.

Anglo last year secured $4.9 billion for its coal assets in Australia and is close to a deal for its nickel mine in Brazil, with an announcement expected in the coming weeks. A spinout of its South African platinum business is expected this year, while the initial public offering of the De Beers diamond business could be extended to next year, according to the company.

Shares in Anglo are trading at about 3 percent higher than the price of BHP’s final all-share offer in May last year, according to calculations by RBC analyst Ben Davies.

A renewal bid would be more likely after Anglo spins out its platinum business, he said. “It will be a different company after these restructuring changes,” he said. “I think there is already a bid premium in shares today.”

Taking over Anglo’s copper assets — specifically the Colahuasi mine in Chile and its stake in Peru’s Cuellaveco copper mine — was a key part of BHP’s original bid rationale for Anglo.

BHP said it was focusing on investing in its existing copper assets. But it’s expensive: The company revealed last year that it would spend up to $10 billion to ramp up production at its Escondida copper mine in Chile.

The company recently completed a $3 billion purchase with Lundin Mining of an undeveloped Argentine copper resource, Filo del Sol.

“There is no transaction that is a ‘must do’ transaction for BHP,” chief executive Mike Henry told the Financial Times in December.

He added that the company only does deals when it is for the right product, for the right long-life asset and when additional value can be unlocked by owning BHP. “It’s a pretty rigorous test set. There aren’t many opportunities that meet all these criteria,” he said.

Under Chief Development Officer Catherine Rowe, who joined the company last April, BHP has recently restructured its mergers and acquisitions team, previously split along regional lines, to bring together certain global functions.

Under London takeover rules, BHP is allowed to renew its bid for Anglo, if it chooses to do so, after a six-month standstill period expires at the end of November.

Additional reporting by Susannah Savage