Anglo American rejects second BHP proposal

Anglo American has rejected BHP’s (ASX: BHP) second proposal after the latter revised the original $59.57b (£31.1b) proposal.

Anglo rejected the first proposal as it “significantly undervalues Anglo American and its future prospects” and the company’s board believed it contemplated a structure which is highly unattractive for shareholders.

On May 7, Anglo American received a second unsolicited, non-binding and highly conditional combination proposal from BHP.

Under the latest proposal, for each Anglo American share owned, Anglo American shareholders would receive 0.8132 BHP shares and ordinary shares in Anglo American Platinum and Kumba Iron Ore (distributed in proportion to each shareholder’s interest in the two companies).

The board of Anglo American have again rejected this latest proposal as it believes it continues to significantly undervalue the company and its future prospects. The board also believes it’s highly unattractive for shareholders, given the uncertainty, complexity and significant execution risks.

Anglo American chairman Stuart Chambers commented on the rejection.

“The latest proposal from BHP again fails to recognise the value inherent in Anglo American,” he said.

“Anglo American shareholders are well positioned to benefit from increasing demand from future enabling products while the increasing capital intensity to bring greenfield supply online makes proven assets with world class resource endowments ever more attractive.

“The BHP proposal also continues to have a highly unattractive structure. This leaves Anglo American, its shareholders and stakeholders disproportionately at risk from the substantial uncertainty and execution risk created by the proposed inter-conditional execution of two demergers and a takeover.”

BHP chief executive Mike Henry says the company is disappointed the second proposal has been rejected.

“BHP put forward a revised proposal to the Anglo American board that we strongly believe we would be a win-win for BHP and Anglo American shareholders. We are disappointed that this second proposal has been rejected,” he said.

“The combined business would have a leading portfolio of high-quality assets in copper, potash, iron ore and metallurgical coal and BHP would bring its track record of operational excellence to maximise returns from these high-quality assets.

“The combined business would also have the balance sheet strength, capital discipline and operation capability to execute the attractive pipeline of growth options in BHP and Anglo American’s portfolios.”