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Anglo Declines BHP's Desperate Attempt To Resume Acquisition Negotiations

Anglo Declines BHP's Desperate Attempt To Resume Acquisition Negotiations
Anglo American on Wednesday turned down BHP Group's desperate plea for an extension to review its $49 billion acquisition bid, calling it too complicated and probably signalling the end of the larger rival's five-week chase.
Anglo had rejected a third acquisition bid, which it deemed too difficult to carry out, and had given BHP a one-week extension until 1600 GMT on Wednesday to submit a binding offer.
Up until then, BHP is still need to walk away or make a definite offer. Although it has previously said it would not launch a hostile bid, it declined to respond right away.
On Wednesday, BHP's stock ended the day unchanged at A$45.08. At 11:45 GMT, Anglo's had dropped 1.9% to 25.09 pounds.
Listed in London In order to address concerns about the proposed deal's structure, namely the requirement that Anglo unbundle its South African platinum and iron ore operations prior to the takeover, Anglo agreed to start negotiations with BHP.
BHP had previously stated that it required more time to speak with Anglo, that it would reduce regulatory risk in South Africa, and that it would provide a break fee in the event that the acquisition did not receive regulatory clearances.
Among these pledges was the guarantee of jobs for South African workers. Additionally, BHP stated that it will pay for the higher South African employee ownership that any demerger is anticipated to need.
Anglo, however, claimed that the pledges were insufficient.
"BHP continues to restate its belief that the risks of its complex structure are not material, yet has repeatedly and consistently stated both publicly and during the engagements that it is unwilling to amend its proposed structure to assume these risks," Anglo said in its statement.
Since Anglo was established in 1917 in Johannesburg and employs over 40,000 South Africans, its removal would deal a serious blow to the economy of the nation, whose miners have been slashing employment and investment as platinum in particular has lost popularity.
On Wednesday, South Africans will cast ballots in an election that might see the African National Congress lose its majority after 30 years in office, partly as a result of discontent about high unemployment and a sluggish economy, according to surveys.
According to JP Morgan analysts, a purchase of Anglo by BHP may cause $4.3 billion in capital flight out of South Africa and depreciate the rand.
"Today's announcement says to me that BHP are doing all they can to placate any concerns Anglo's board could have from a South Africa jobs, and regulatory point of view," said analyst Hayden Bairstow of broker Argonaut in Perth about BHP's request for more time.
Anglo's investors, according to a person familiar with the company's thinking, had similar concerns about BHP's proposal.
"The majority of the Anglo shareholders fully understand the concerns that are being expressed and I don't believe that they feel that the risks in the structure and the price are fully taken into consideration by BHP," said a source.
Anglo is valued at 29.34 pounds per share, or 38.6 billion pounds ($49 billion), according to BHP's most recent bid. Acquiring Anglo would bolster BHP's standing in copper and other commodities essential to the global transition to sustainable energy.
Anglo, on the other hand, has presented its own strategy to sell off less lucrative holdings and concentrate on raising copper production.
"I'm not surprised it was rejected really by Anglo ... because there wasn't really a lot in the statement from BHP ... it didn't seem that compelling," said George Cheveley, portfolio manager at Ninety-One, which holds a stake of about 2% in Anglo.
"If BHP walk away, Anglo have a plan - are they allowed to do that? That's the question really, or does somebody else come in?"
Rivals are drawn to Anglo because of its highly valued copper holdings in Chile and Peru. Copper is a metal that is used in everything from construction to electric cars and power grids, and its demand is predicted to grow as the globe shifts to greener energy sources and more extensive applications of artificial intelligence.
According to someone familiar with the matter, Anglo's comments may have essentially terminated the agreement, and BHP would have had no chance to submit a bid before Wednesday's deadline.

Christopher J. Mitchell

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