BHP Billiton spends $39 billion to acquire Anglo American, involved in mining giants

Miners are working.

Graeme Williams | Gallo Images Roots RF Series |

mining giant BHP Group Thursday said it has made an all-share takeover offer to rivals Anglo AmericanThe smaller company is valued at £31.1 billion ($38.9 billion).

At 10:05 a.m. in London, Anglo American shares rose 13%.

The company confirmed it had received an “unsolicited, non-binding and highly conditional merger proposal” and said it was reviewing the proposal with advisers.

Australia-based BHP, the largest listed miner by company market capitalization, said the deal would deliver 0.7097 BHP shares to common shareholders for every Anglo American share.

BHP Billiton said the merger would optimize Anglo American’s “assets and long-term growth potential” with “high margin cash-generating assets and growth projects, as well as greater free cash flow and a stronger balance sheet”.

According to Reuters analysis, the merger of these companies will form a giant in the field of copper mining and become the world’s largest player in this field, and its output will be 10% of global production. Anglo American has a large copper mining business in South America, targeting copper production of 730,000 tonnes to 790,000 tonnes in 2024. In comparison, BHP Billiton’s copper production target for the same period is 1.7 million to 1.9 million tonnes.

Mining companies are looking to increase copper supply in the coming years due to copper supply shortages and its key role in the energy transition (it is used in electric vehicles, power grids and wind turbines).

Todd Warren, a portfolio manager at Tribeca Investment Partners, told CNBC’s “Signpost Europe” on Thursday that copper appears to be “a prime target for BHP to compete for” because of its future growth potential.

BHP has completed the acquisition of OZ Minerals in 2023 targeting its copper and nickel portfolio.

M&A activity has increased over the past four years as companies position themselves for changing demand patterns, although not on the scale of BHP’s potential deal with Anglo American.

AJ Bell investment analyst Dan Coatsworth said the mining industry is now “going back to old habits and chasing mega-consolidations”.

“Anglo-American is put in the cross-hairs,” Coatsworth said in emailed comments. He said this in a report on Thursday.

“This provides an opportunity for larger rivals to jump into the business, whose assets are valuable enough in the long term and any short-term operational problems can be resolved,” he said, noting that BHP Billiton would be particularly affected. Investing in “large, low-cost and durable assets” such as iron ore, metallurgical coal, potash and copper.

Anglo American share price.

The deal will also increase BHP’s investment in the diamond industry, as Anglo American owns 85% of De Beers, a well-known mining company and retailer.

Coatsworth noted that BHP may consider exiting the business as the diamond market has struggled recently due to declining demand for luxury goods and competition from lab-grown diamonds.

BHP said its proposal was dependent on Anglo American dividing its stake between shareholders in South Africa’s Anglo American Platinum Ltd and Kumba Iron Ore Ltd.

As demand for diamonds weakens, some analysts describe platinum as a less attractive long-term asset because of the shift away from internal combustion engines that use it.

Tribeca’s Warren told CNBC that the mining industry has believed for some time that “diversification is the way to go.”

“But the reality that we’re seeing in the market is that different assets, depending on what those assets are based on, will attract value and capital market interest… especially those assets that are no longer valued. The timing of BHP’s bid is fantastic, creating opportunities,” Warren said.

BHP will merge its dual-listed operations into a single legal entity in 2022 with an initial listing in Australia.

Markets were closed on Thursday morning ahead of the announcement.