There is a danger that BHP ends up overpaying for Anglo American, which on Monday rejected the Australian mining giant’s revised bid for its global assets – minus those in SA – as too low.
Anglo dislikes BHP’s proposed deal structure, particularly the undoubtedly lengthy process of unbundling Kumba and Angoplat and obtaining regulatory approvals. Anglo shares fell on Monday following its rejection of the revised BHP bid, which is 14.6% higher than the initial unsolicited bid announced in April.
“What will really stir things up is if another bidder enters the race. This, of course, raises the possibility that BHP or someone else ends up overpaying for Anglo. BHP doesn’t exactly have a great track record of deal making, nor does Rio Tinto, and what they seem to forget is that commodities are cyclical and they will get another shot at it later if they are prepared to wait.
BHP’s stronger balance sheet and $11.3 billion cash flow would provide stability and provide the investment needed to grow its copper portfolio.