BHP (ASX: BHP) has retracted its bid to acquire Anglo American (LON: AAL) after the mega-miner rejected an extension for negotiations on Wednesday. Despite considering its offer “compelling,” BHP emphasized its commitment to a “disciplined approach” to mergers and acquisitions.
Analysts had predicted the cancellation of the deal when Anglo denied BHP’s request for an extension. RBC noted in a statement to investors that the proposed US$49.2B takeover structure was too intricate for BHP to pursue aggressively. They wrote, “If BHP doesn’t launch a formal bid, it will be barred from buying Anglo for six months, unless a competing offer emerges.”
“BHP will not be making a firm offer for Anglo American,” stated CEO Mike Henry just before the deadline for a formal bid. He added, “While we believed that our proposal for Anglo American was a compelling opportunity to effectively grow the pie of value for both sets of shareholders, we were unable to reach agreement with Anglo American on our specific views in respect of South African regulatory risk and cost.”
Anglo, in a post-market statement, outlined “a clear pathway” to expedite its strategy and “to unlock significant value” for its shareholders. “Our shareholders will benefit from value transparency and undiluted exposure to a simpler portfolio of world class assets,” said chairman Stuart Chambers. Earlier, Anglo had also expressed that BHP’s proposal failed to address the “highly complex and unattractive structure” of the deal.
BHP’s proposed complex transaction scheme was the central issue in the five-week negotiation period. Anglo contended that the requirement to spin off its majority stakes in two South African miners posed excessive risk to its investors, who would consequently hold those shares. Anglo sought either an alteration in the proposal structure or compensation for any potential loss of value from the spinoffs.
BHP maintained that the risks associated with its takeover plan were “quantifiable and manageable,” with the costs of the proposed measures already included in its offer. “We remain of the view that our proposal was the most effective structure to deliver value for Anglo American shareholders, and we are confident that, working together with Anglo American, we could have obtained all required regulatory approvals, including in South Africa,” said Henry.
