Miami’s $44 Billion Mining Slugfest Pits BHP Against Anglo American

All roads lead to Miami this week for the next round in a heavyweight corporate brawl which has pitted BHP, the world’s biggest mining company, against Anglo American, a former champion.

The chief executives of both companies are scheduled to speak at an annual Bank of America mining investment event which has traditionally been a magnet for mining leaders and major investors.

Duncan Wanblad, chief executive of London-listed but South African focused Anglo American, is scheduled to speak at 8am this morning (Tuesday), followed by BHP chief executive, Mike Henry.

What both men have to say will be closely followed because BHP is proposing a $44 billion takeover of Anglo to create the world’s undisputed mining champion and biggest producer of the hottest metal in the market today, copper.

A second critical event in the highly conditional share-swap merger proposed by BHP falls due next week with British takeover law requiring BHP to make a formal offer by May 22, or walk away.

The Jury Is Out

The jury is out on BHP’s proposal which started at a value of approximately $31.40 (25 British pounds) but which was raised yesterday to $34.70 valuing the 107-year-old Anglo American at close to $42.5 billion, one third the size of BHP which is valued at $141 billion.

Anglo American’s board has rejected both offers describing them as “highly unattractive” and earlier today unveiled a radical restricting plan which involves selling its iron ore, diamonds and platinum business units to focus on three core assets, copper, iron ore and fertilisers.

BHP is yet to reply to the break-up proposal from Anglo American and is also battling a poor reception in the company’s South African birthplace where Anglo American is seen as a national corporate champion and major employer as well as having deep historic connections to diamond and gold mining.

At its peak in the 1970s companies controlled by Anglo American were estimated to have represented more than half the collective value of the Johannesburg stock exchange.

It’s very different today with Anglo American having shifted its head office to London and to now count copper mining in South America as its most valuable asset.

BHP is keen to get its hands on the copper, but far less keen on the South African platinum and iron ore which it wants Anglo American to hive offer before a formal merger can proceed — a move which might have just started.

In effect, BHP has been asking its takeover target to do the heavy lifting before a deal can be struck, and that’s also before winning approval from South Africa’s competition commission which has warned that it will apply a national interest test to any formal offer.

Investors and investment banks do not yet appear impressed with BHP’s move on Anglo American. RBC Capital Markets noted the need for BHP to make major savings through operational synergies to justify the price being offered. London-based Liberum Capital said the proposal, as structured, is doomed.

In Miami, BHP’s Henry is likely to be asked whether the latest share swap terms of 0.8132 BHP shares for each Anglo American share is the final offer, or will it be sweetened further.

Anglo American’s Wanblad will be asked for details on his major strategic update and for more details on cost overruns and project completion delays which rocked the business last year, almost certainly setting in motion BHP’s merger proposal.