The BHP Group Ltd (ASX: BHP) share price is under the spotlight today after revealing a larger bid for Anglo American plc (LON: AAL).
BHP’s first bid was rejected and decided to come back for another attempt.
BHP’s second bid for Anglo American rejected
The ASX mining share announced that on 7 May 2024 it made a revised proposal to the Anglo American board of directors with a bigger bid.
The new offer was also an all-share offer, subject to the distribution of both the Anglo American’s Platinum and Kumba Iron Ore divisions to shareholders immediately before completing the takeover.
This new offer was for 0.8132 BHP shares for each Anglo American share they owned. That compared to 0.7097 BHP shares last time, so this second bid was 14.6% bigger than last time.
BHP said this would increase Anglo American shareholders’ total ownership in the combined business from 14.8% in the first bid to 16.6% with the second bid once the potential combination was completed.
The ASX miner said the revised proposal represented a total value, based on undisturbed share prices, of approximately £25.08 per Anglo American share including £4.86 in Anglo American Platinum shares and £3.40 in Kumba shares
Anglo American’s response
This larger proposal was rejected by the Anglo American board on 13 May 2024.
BHP said it was disappointed the board has chosen not to engage with BHP about this revised proposal and the improved terms.
The ASX mining share said it continues to believe that a combination of the two businesses would deliver “significant value” for all shareholders.
Management commentary
The BHP CEO Mike Henry said:
BHP and Anglo American are a strategic fit and the combination is a unique and compelling opportunity to unlock significant synergies by bringing together two highly complementary, world class businesses.
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 operational capability to execute the attractive pipeline of growth options in BHP and Anglo American’s portfolios.
Final thoughts on the BHP share price
BHP clearly wants to own the quality iron and copper assets that Anglo American has, but it shouldn’t pay too much of a high price for the business – those mines are only going to produce so much value over their lives.
If Anglo American doesn’t want to talk, then BHP should look elsewhere. It may cost more to find new deposits and build mines because of inflation compared to pre-COVID times, but at least BHP won’t have to bid against itself to do get a new project.
I think BHP is at a more attractive price than at the start of 2024, though I’d prefer to pay a lower price than what it’s trading at now.
