BHP Shelves Plan to Acquire Anglo American: Stock Price Rose Too Much!

According to informed sources, BHP Group has once again abandoned its approximately $50 billion acquisition proposal for Anglo American, as the latter's rising stock price has made the deal too expensive.

Last year, shortly after BHP's $49 billion acquisition attempt for Anglo American fell through, Anglo American launched an aggressive restructuring plan to sell its coal, platinum, and diamond businesses, which was well-received by investors.

The core reason for BHP's interest in Anglo American lies in the expected increase in copper demand as global decarbonisation progresses and supply tightens. BHP aims to seize the opportunity to expand its copper business. Copper accounts for about 30% of Anglo American's production.

BHP has emphasised that copper and potash are its investment priorities. If it acquires Anglo American, BHP would become the world's largest copper miner, accounting for approximately 10% of global supply. Few other acquisition opportunities could allow the company to expand its footprint in the copper sector so rapidly, and copper is arguably the most critical component of the energy transition.

Informed sources claim that after the failed acquisition, BHP has been closely monitoring Anglo American's progress but believes that Anglo American's stock price has become too expensive, leaving no reason to make a new acquisition offer in the short term.

Over the past 12 months, Anglo American's stock price, listed in London, has risen by 40%, while BHP's stock price has fallen by 17% amid declining iron ore prices.

George Cheveley, a fund manager at investment management company Ninety One, stated that on the surface, BHP's offer already reflects what they consider a reasonable price, leaving no clear reason or motivation to raise the bid.

Additionally, last year, Anglo American successfully sold its coal assets in Australia for $4.9 billion and is nearing a deal for its nickel mine in Brazil, which is expected to be announced in the coming weeks. Anglo American also plans to spin off its South African platinum business this year, while the IPO of its De Beers diamond business may be delayed until next year.

According to calculations by RBC analyst Ben Davis, Anglo American's current stock price is approximately 3% higher than BHP's final all-stock offer made in May last year.

He also stated that BHP might revisit its acquisition offer after Anglo American spins off its platinum business. He remarked, "After these restructurings, Anglo American will be a completely different company. I think the company's stock already includes a certain acquisition premium."

BHP CEO Mike Henry said in an interview last December, "For BHP, there is no such thing as a 'must-do' deal." He added that BHP would only pursue acquisitions when it encounters the right commodities, the right long-term assets, and the ability to unlock additional value through the company's ownership.

Under London takeover rules, after the six-month quiet period ends in late November, BHP could make a renewed bid for Anglo American if it chooses to do so.