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Anglo American was pressed by key shareholders including BlackRock to extend talks with BHP over its proposed £38.6bn mining megamerger.
Shareholders were crucial in convincing the FTSE 100 group to begin negotiations with its Australian rival, according to people familiar with the matter. This week, Anglo received a third proposal valuing it at £31.11 per share — a level in the ballpark of “fair value” for some shareholders.
Anglo, however, rejected this “final” offer from BHP on Wednesday, but surprised the market by extending talks by another week, keeping hopes of the deal alive. BHP has until 5pm on Wednesday to make a formal bid or walk away.
BlackRock, which owns a 9.6 per cent stake in Anglo, was among a handful of investors that encouraged meaningful negotiations with BHP, the people close to the situation added.
Much of BlackRock’s stake is held via passive funds tracking an index but the world’s largest asset manager holds a large sway in the sector through Evy Hambro, its chief investment officer for natural resources and a veteran of the mining industry. It also holds 6.9 per cent of BHP.
BlackRock and Anglo declined to comment.
Two other significant shareholders, Ninety One and Sanlam Investments, told the Financial Times they also backed the decision to extend, despite concerns about a deal structure that requires Anglo to spin off its stakes in its South African platinum and iron ore units.
“We’ve been advocates of what’s in the best interests of Anglo shareholders and wanted them to at least have a discussion with BHP,” said one shareholder.
The investor said that they were keen that the company weighed up the merits of the BHP bid relative to Anglo’s own proposal to break itself up.
Dawid Heyl, portfolio manager at Ninety One, which owns 1.8 per cent of Anglo, said that “we think an agreed deal would be a good outcome, and it looks like it could be heading that way”.
He added that £31 is “coming into the range of the sort of premium you’d expect for a change of control at a company”.
The deadline extension — which coincides with South Africa’s general election — marked a turning point in proceedings, with Anglo showing the first signs of willingness to engage.
However, its executive team, led by Duncan Wanblad, believes its own plans to hive off four major units will create more value than a takeover.
The distance between the two sides and the national election could mean negotiations are extended again.
The two sides are trying to bridge estimates of the risks involved in conducting two demergers and a change of control at one of South Africa’s most iconic companies.
A number of Anglo shareholders still oppose the deal. Old Mutual, which owns 2.2 per cent, was not convinced the final offer had the knockout premium needed for its backing.
“It still suffers from the problem that whatever happens, you’re tied into a fixed rate waiting for them to unbundle Kumba and Amplats, which could take 18-months to two years,” says Old Mutual analyst Ian Woodley. “At least with Anglo’s plan, you could get a value for Anglo which, if copper soars as some think it could, would be more fairly reflective.”
Woodley adds that for a deal to be achieved, “the question is — will BHP be willing to amend the structure?”
The structure needs altering or BHP must pay up more, people close to Anglo say.
But people familiar with BHP’s thinking insist there is no more wriggle room on the structure or price — only smaller, creative structures to better share the risks.
Andrew Snowdowne, equity analyst at Sanlam, which owns 0.6 per cent of Anglo, said that “we do think more needs to be allowed for a deal premium,” as he called the decision to extend talks “prudent”.
South African government-owned Public Investment Corporation (PIC), the second largest Anglo shareholder, said on Wednesday that any deal would require a “meaningful revision” to account for “material risks” for shareholders.
