BHP shares slip on rejected takeover bid for Anglo American
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More news: BHP shares slipped 2.51% to $45.08 in early trading following the announcement that Anglo American had rejected its latest takeover bid.
RBC Capital Markets analysts viewed the bid as negative for BHP as there was too much project and synergy executive risk. However, they saw the bid as positive for Anglo American as the seven-day extension would translate to a positive share price reaction.
What they said: RBC said when accounting for synergies and the undisturbed Anglo American valuation, the analysts came to a price of £25.6 to £27.4 ($49.18 to $52.63) per share.
“Today’s offer of £29.34 per share is well above the top range of what we see as being value accretive, and we estimate the revised final offer factors in synergies in excess of ~US$7b ($10.57 billion), plus operational recovery and long-term growth projects (that may or may not eventuate) from AAL’s key assets such as Los Bronces, Quellaveco and Collahuasi,” RBC said.
“We believe there is too much project and synergy execution risk in our view.”
Anglo American rejects third takeover offer by BHP, extends deadline
The news: Anglo American has rejected a third takeover offer proposed by BHP on Wednesday, and given BHP one more week to submit an improved bid.
The numbers: The new offer was set at approximately £29.34 ($56.19) per Anglo American share, valuing Anglo at about £38.6 billion ($73.92 billion). BHP has said that the new increase to the share ratio offered is final and will not be increased.
The context: Anglo American has said that while it rejects the bid, it has requested an extension to the ‘put-up-or-shut-up’ (PUSU) takeover deadline for when BHP has to make an offer or walk away, by one week, until 5pm on 29 May.
Shares in Anglo American have been volatile since the announcement, with investors unsure what to make of the news. Anglo's decision to extend the PUSU deadline can be interpreted as a continuation of the negotiations, however BHP's statement that the offer is final may be undermining optimism around the deal.
Anglo's chairman, Stuart Chambers, said that BHP's offer does not address the Board's concerns about the complex structure, execution risks, and extended timeline to completion. This holds the potential for "material value leakage" which would impact Anglo shareholders.
BHP said that the companies have made progress on these topics over the course of the engagement so far, and is hopeful that resolution will be reached in the next seven days.
Earlier on Wednesday, the second largest Anglo American shareholder, PIC, said that BHP would need to make a “meaningful revision” to its offer for its smaller rival, just hours before the original takeover deadline expired on the mining mega-deal. The South African state-owned PIC holds 7.4% of Anglo stock, and a smaller amount of BHP stock.
What they said: Stuart Chambers, chairman of Anglo American, commented: "The Board is confident in Anglo American's standalone future prospects and believes that Anglo American has set out a clear pathway and timeframe to deliver the acceleration of its strategy to unlock significant and undiluted value for Anglo American's shareholders [...] the Board is willing to continue to engage with BHP and its advisers on this topic and has therefore requested a one week extension to the PUSU deadline which has been consented to by the Panel."
Mike Henry, BHP CEO said: "BHP has put forward a final offer ratio of 0.8860 BHP shares for each Anglo American share. This is a significant increase from our first proposal and would provide Anglo American shareholders with 17.8% of a combined BHP and Anglo American [...] BHP looks forward to engaging with the Board of Anglo American to explore this unique and compelling opportunity to bring together two highly complementary, world class businesses."
