BHP Group is asking for more time to discuss its US$49 billion takeover plan with Anglo-American and outlined a series of commitments to the smaller company, with just hours left to go until a crucial deadline.
The two miners have been locked in an impasse over the proposed structure of BHP’s deal, which requires Anglo to first spin off its holdings in two South African companies before a takeover. Anglo says that the plan creates too much risk for its own investors, who will be left holding shares in the spinoffs.
BHP outlined a list of proposals it says will ensure that the Anglo’s shareholders don’t “disproportionately” bear the cost of the deal, and said it’s prepared to discuss a reverse break fee, which would be payable if it didn’t secure regulatory approvals.
However, the latest statement didn’t appear to address the biggest concerns cited by Anglo and its shareholders, regarding the potential loss of value for in the South African businesses as a result of the spinoff. On the measures it outlined, BHP said it has “already factored the costs associated with these risks into the offer ratio of its proposal.”
Measures included commitments to share in the cost of any requirements to increase South African employee share ownership of the South African businesses, maintain funding for Anglo’s charitable commitments and support local procurement in South Africa.
Anglo has repeatedly rebuffed proposals from BHP to partly break up and then acquire the 107-year-old company, but last week agreed to a one-week extension to a UK deadline in order to extend talks. BHP now has until 5 pm London today to commit to a firm offer or walk away for six months.
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The structure of BHP’s proposal – which required Anglo to first spin off its South African platinum and iron ore units – has remained a crucial sticking point. Anglo, which this month rushed out a radical restructuring plan of its own, wanted BHP to either change the structure or commit to cover any future costs to its own shareholders – who will end up owning the listed South African companies – as a result of the multi-step deal.
Several of Anglo’s biggest shareholders said last week that they supported the company’s efforts to persuade BHP to change the structure of its takeover proposal or compensate for the risks it presented.
“BHP believes a further extension of the deadline is required to allow for further engagement on its proposal,” it said in a statement Wednesday (May 29). The company said in the statement that it “believes that the proposed measures it has put forward provide substantial risk protection for Anglo-American shareholders and supplement the significant value uplift that Anglo-American shareholders will receive from the potential combination.” BLOOMBERG
