BHP (ASX: BHP) Surges on Anglo American's Break-Up Plan

2 min read | May 15, 2024 01:43 PM AEST | By Team Kalkine Media

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BHP (ASX: BHP) Surges on Anglo American's Break-Up Plan — Image source: Andriy Solovyov, Shutterstock

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Australian-listed shares of BHP Group (ASX: BHP) surged by 2.56% to AU$44.26 apiece on Wednesday following the announcement of a break-up plan by its takeover target, Anglo American (LSE:AAL), aimed at defending against an AU$43 billion offer.

This rise in BHP's share price outpaced the performance of Australia's benchmark S&P/ASX200 index, which saw a 0.49% increase.

Anglo American revealed on Tuesday its intention to divest its less profitable coal, nickel, diamond, and platinum businesses, redirecting its focus towards copper in an effort to counter BHP's acquisition bid. Having twice rebuffed BHP's informal offers, Anglo believes that a strategic break-up would serve the best interests of its shareholders.

In response to BHP's bid, Anglo has increased its asking price to 27.53 pounds per share, up from the previous 25.08 pounds, in an all-share proposal rejected on Monday. BHP now faces a deadline of May 22 to present a binding offer, failing which, according to UK takeover regulations, it would be required to abstain from making another bid for six months.

Anglo's restructuring strategy involves divesting its steelmaking coal assets, demerging its South African platinum unit, exploring options for its nickel mines, and either divesting or demerging its diamonds business, De Beers. The company anticipates that this realignment will lead to a reduction in costs by AU$1.7 billion.

Wen Li, Head of Metals and Mining at CreditSights, commented on Anglo's strategy, suggesting that while it appears to be a feasible alternative to BHP's acquisition, it is not without its challenges. Li highlighted potential execution risks and regulatory obstacles, particularly concerning the fair valuation of assets and the South African government's stance on the spin-off of the platinum group metals business.

Following the announcement, Anglo's shares concluded 3.2% lower at 26.195 pounds on Tuesday. Investors are closely monitoring developments as both companies navigate this significant juncture in their corporate strategies.

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