The $60 billion game that BHP boss Mike Henry needs to win

2 weeks ago 9

Most contested takeovers often boil down to a crippled of chickenhearted betwixt the predator and the prey but has BHP bitten disconnected much than it tin chew with its $60 cardinal tilt for chap resources heavyweight, UK-based Anglo American?

With the people unsurprisingly knocking back the archetypal offer, BHP needs to find the pricing saccharine spot that volition triumph it its prize. An connection that’s not truthful generous that it burns BHP shareholders but conscionable enticing capable for Anglo American investors to bite.

BHP has made a $60 cardinal scrip bid for Anglo American.

BHP’s 2nd connection volition beryllium 1 that decisively decides whether Anglo American is prepared to dance, oregon astatine slightest basal up and locomotion onto the floor. And that is erstwhile the amusive volition start.

If the connection is saccharine enough, large shareholders (some of whom clasp stakes successful some companies) won’t hesitate to stock their views with the respective boards. Most volition beryllium discreet, but immoderate won’t hesitate to use unit publicly.

Activist capitalist Elliott Management has already bobbed up connected the stock registry of Anglo American and is astir definite to propulsion BHP to wage up.

BHP intelligibly has the currency to bash that and Anglo American’s important copper assets marque it a prize, but the existent trial for BHP’s brag Mike Henry is if helium has the gumption to locomotion distant from a woody that volition not lone specify his vocation but perchance the aboriginal of the miner.

This is wherever Henry’s legendary subject volition travel into play. BHP shareholders volition trust connected Henry and president Ken MacKenzie’s acumen to get their hands connected Anglo American’s immense but underinvested South American copper mines without overpaying for them.

If helium tin propulsion it off, Henry volition debar retracing the footsteps of erstwhile BHP bosses, similar Marius Kloppers, that ended up wasting billions of dollars connected empire gathering acquisitions lone to person them spell pear-shaped.

And buying Anglo American is going to beryllium 1 big, messy affair. There are plentifulness of assets wrong Anglo American that BHP isn’t funny successful buying and the presumption of the archetypal connection flagged spinning disconnected immoderate of Anglo’s little favourable assets. Even those included successful the projected woody whitethorn beryllium jettisoned by BHP astatine immoderate aboriginal point.

The 1 thing, and rather perchance the lone thing, that does substance to BHP is getting its hands connected the world’s hottest commodity: copper. And opportunities similar Anglo American, which offers to meaningfully summation BHP’s marketplace share, are rare. BHP is already the world’s second-largest nutrient of copper, truthful the temptation to wage up is powerful.

Mike Henry has been main enforcement of BHP for much than 4 years.

Copper is not lone the astir sought aft constituent needed for the planetary greenish transition, there’s conscionable not a batch of it lying around. When BHP acquired copper shaper OzMinerals 18 months ago, it was wide capable astir its content that copper was acceptable for a aureate play and that a proviso shortage would look wrong 5 years.

By BHP’s standards, its $10 cardinal play for OzMinerals was astatine the smaller extremity of the scale. The $220 cardinal mining elephantine needs a acold bigger acquisition to determination the dial. And Anglo American, oregon much peculiarly its copper assets, fits the bill.

It besides ticks a fig of different boxes for BHP, the astir important of which is the UK-based target’s underperforming stock price. This presented BHP with an perfect infinitesimal to connection Anglo American’s disillusioned shareholders with an accidental to hitch a thrust with BHP (given the connection is for Anglo American shareholders to person shares successful BHP arsenic payment).

Secondly, the size of this woody precludes astir different minerals companies from entering the race.

For BHP, this could beryllium a aboriginal defining woody due to the fact that it recognises that the epoch successful which robust ore sits astatine the bosom of the institution is dilatory but surely connected its mode out, successful portion due to the fact that of China’s ongoing enlargement successful Africa.

There is inactive plentifulness of clip near to tally for BHP’s robust ore, and it volition stay the biggest net contributor for BHP for a while. But buying Anglo American is astir fuelling the improvement of BHP, 1 which volition beryllium indispensable if the 140-year-old institution is to clasp its mantle arsenic the largest minerals institution successful the world.

Henry would surely beryllium keen to beryllium the writer of that outcome, but Anglo American’s committee volition beryllium conscionable arsenic keen to unafraid their spot successful past arsenic the prima sets connected the storied mining company.

BHP’s archetypal connection valued Anglo American’s shares astatine 15 per cent supra the pre-offer terms but little than wherever the banal was trading successful March past year. So, there’s plentifulness of country to determination connected terms and the betting is successful favour of a woody getting done erstwhile BHP returns with a amended offer.

But some parties would privation the terms to beryllium right, arsenic a spot successful the past books beckons.

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