Anglo American rejected an improved £34bn offer from BHP

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Anglo American has rejected an enhanced takeover proposal from rival BHP that would value the UK-listed miner at £34bn, intensifying a battle between the two titans of global mining.

BHP’s new non-binding, all-share proposal values ​​its smaller rival at £27.53 per share – up from roughly £25 per share in last month’s original offer, the Australian group said on Monday.

BHP’s latest bid represents a 15 percent increase in the merger rate over its previous proposal, according to BHP, and a 30 percent premium to Anglo’s share price before takeover talks became public.

BHP said it was “disappointed that the Anglo American board chose not to engage”. The Australian miner said the new approach did not have a firm intention of making an offer and had until next Wednesday to decide whether to make a formal bid.

Anglo said in a statement that BHP’s revised non-binding offer still “significantly” undervalues ​​the company’s assets and its prospects, and reiterated that the structure was “highly unattractive” to shareholders. Last month it rejected the first unsolicited £31bn takeover approach from BHP on similar grounds.

Anglo shares fell 2.4 per cent to £27.07 in London, giving the company a market value of £37bn.

Details of BHP’s latest approach put pressure on Anglo chief executive Duncan VanBlatt, a day before a major industry gathering in Miami, to demonstrate that a holistic strategy can deliver better returns for investors.

BHP is eyeing Anglo’s copper mines in Latin America: a merger between the two groups would create the world’s largest producer of the metal, which is vital to the world’s efforts to decarbonise. This will enlarge BHP’s footprint in iron ore and steelmaking coal. The deal will be the largest in the mining sector.

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BHP chief executive Mike Henry said on Monday the “win-win” plan would have raised Anglo shareholders’ total ownership in the combined company to 16.6 per cent, up from 14.8 per cent under the first indicative offer.

However, the new proposal maintained a clause requiring Anglo to spin off two South African businesses before the transaction – prompting a backlash from Pretoria.

When contacted by the Financial Times on Monday, Anglo’s second largest shareholder, South Africa’s state-owned Public Investment Corporation, reiterated that mining is “an important part of the South African economy, affecting a wide range of stakeholders”. Any bid “must take into account these factors and long-term sustainability”.

BHP said it “believes the combination of the two businesses will deliver significant value to all shareholders”.

“We are disappointed that this second proposal was rejected,” Henry said.

Mark Kelly, chief executive of MKP Consultants, said: “BHP clearly has the right to go hostile”.

George Cheveley, portfolio manager at Anglo and BHP partner Ninety One, said his initial reaction to the revised plan was “we’ll have to wait and see what Anglo’s own plan is”.

Wanblad promised to put forward a plan to replace the sprawling iron ore, platinum, copper and other minerals after conducting a systematic asset review, when Anglo’s shares suffered their worst one-day fall since December. Anglo said he would present those plans on Tuesday.

Some investors predict the company, which was founded 107 years ago in South Africa, will be bought or broken up. Anglo’s challenges have also attracted activist hedge fund Elliott Management, which has built a sizeable stake in the company.

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BHP said there would be “meaningful synergies”, without specifying a number. Analysts at RBC estimate that an offer of more than £30 a share would be needed to sway all of Anglo’s shareholders.

BHP clarified that it would give Anglo two board seats in its new plan and that it would bear the cost of demerging the South African units. South Africa will face a capital gains tax of $2 billion, according to people familiar with the matter.

Additional reporting by Luganyo Mnyanda

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