LA Private

BHP rises ahead of Anglo American bid deadline

Shares in BHP Group (ASX:BHP) closed at a three-month high on Tuesday, 36 hours ahead of a deadline to lodge a formal bid for rival miner Anglo American, which last week rejected a sweetened $US43 billion takeover offering.

BHP shares ended up 0.7% to $46.04 in afternoon trading on the ASX, higher than the $45.23 on the day before Anzac Day in Australia when news of its first approach to Anglo American was made public by that company.

BHP shares touched a low of $42.32 on May 1, so the rebound in May has been a substantial 8.7%, even after the second offer was revealed last week.

Anglo’s London-listed shares closed 0.26% higher at 26.87 pounds on Monday. Anglo shares ended at 22.05 pounds on April 23.

The sharp rise in copper prices and solid iron ore prices have helped buoy BHP shares – iron ore prices closed at $US120.95, a four-month high, on Tuesday on the SGX platform in Singapore.

Under UK takeover rules, BHP has until 5 pm London time (2 am Thursday, Sydney time) today (Wednesday) to make a binding bid for Anglo American or it will be forced to walk away for at least six months. If the companies reach an agreement in the next few hours, an extension can be granted.

Anglo’s board has already knocked back two all-share proposals from BHP as inadequate and too difficult to execute and last week unveiled its own plans for a break-up to focus on copper while spinning out or selling its coal, nickel, diamond, and platinum businesses.

Jefferies analysts said last week that BHP could be interested in the central Queensland coal assets if it did not succeed in its bid for Anglo, given it owns nearby mines. BHP has 50% of BMA (with Mitsubishi of Japan), which is the world’s largest coking coal exporter.

BHP would need to boost its latest offer by about 30% to reflect fair value for Anglo and its key copper assets, JPMorgan analysts said in a note last week. Anglo has been forced to cut copper output for two years to try and resolve the problems in mine management.

Both of BHP’s offers required Anglo to divest its platinum and iron ore assets in South Africa, where it employs more than 40,000 people. BHP has told investors it will not drop its requirement for Anglo to demerge those businesses as a condition of the deal. That is where the deal could fall over.