BHP Asks for More Time in Last-Minute Plea to Anglo

(Bloomberg) — BHP Group is seeking more time to discuss its $49 billion takeover plan with Anglo American Plc and outlined a series of commitments to the smaller company, with just hours left to go until a crucial deadline.

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The two miners are at an impasse over the proposed structure of BHP’s deal, which requires Anglo to first spin off its holdings in two South African companies before a takeover. Anglo says that the plan creates too much risk for its own investors, who will be left holding shares in the spinoffs.

Read More: BHP and Anglo Remain Split on South Africa as Time Runs Out

BHP outlined a list of proposals it says will ensure that Anglo’s shareholders don’t “disproportionately” bear the cost of the deal. BHP also said it’s prepared to discuss a break fee, which would be payable if it didn’t secure regulatory approvals.

However, the latest statement didn’t appear to address the biggest concerns cited by Anglo and its shareholders, regarding the potential loss of value in the South African businesses as a result of the spinoffs.

Anglo’s shares fell 1.3% to £25.25 as of 8:15 a.m. in London, to trade about 16% below the value implied by BHP’s most recent proposal.

On the measures it outlined on Wednesday, BHP said it has “already factored the costs associated with these risks into the offer ratio of its proposal.”

The measures included commitments to share in the cost of any requirements to increase employee share ownership of the South African businesses, maintain funding for Anglo’s charitable commitments and support local procurement in South Africa. BHP said it will maintain these measures for at least three years.

Anglo has repeatedly rebuffed proposals from BHP to partly break up and then acquire the 107-year-old company, but last week agreed to a one-week extension to a UK deadline in order to extend talks. BHP now has until 5 p.m. London today to commit to a firm offer or walk away for six months.

From the moment BHP’s takeover approach first became public, South Africa has loomed front and center of a potential deal. It is home to some of Anglo’s biggest operations, employing tens of thousands of people, and the company has deep political and social ties to the country.

The structure of BHP’s proposal — which required Anglo to first spin off its South African platinum and iron ore units — has remained a crucial sticking point. Anglo wanted BHP to either change the structure or commit to cover any future costs to its own shareholders — who will end up owning the listed South African companies — as a result of the multi-step deal.

Earlier this month, Anglo rushed out a radical restructuring plan of its own.

Several of Anglo’s biggest shareholders said last week that they supported the company’s efforts to persuade BHP to change the structure of its takeover proposal or compensate for the risks it presented.

“BHP believes a further extension of the deadline is required to allow for further engagement on its proposal,” it said in a statement Wednesday. The company said it “believes that the proposed measures it has put forward provide substantial risk protection for Anglo American shareholders and supplement the significant value uplift that Anglo American shareholders will receive from the potential combination.”

While the two sides have been getting closer on value, they have made little progress on the structure of the deal, Bloomberg reported Tuesday.

The outcome of this week’s talks could have far-reaching implications for the mining industry. BHP is already the sector’s most powerful company, and a successful deal would leave it towering over its biggest rivals.

The bid has also cemented the return to large-scale M&A among the largest mining companies, after a string of disastrous deals left BHP and its rivals on the sidelines for over a decade.

Why BHP Is Targeting Anglo in Mining Mega Deal: QuickTake

(Updates with details throughout and shares in fifth paragraph)

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Matt Earle

Matthew Earle is the Founder of MiningFeeds. In 2005, Matt founded MiningNerds.com to provide data and information to the mining investment community. This site was merged with Highgrade Review to form MiningFeeds. Matt has a B.Sc. degree with a minor in geology from the University of Toronto.

By Matt Earle

Matthew Earle is the Founder of MiningFeeds. In 2005, Matt founded MiningNerds.com to provide data and information to the mining investment community. This site was merged with Highgrade Review to form MiningFeeds. Matt has a B.Sc. degree with a minor in geology from the University of Toronto.

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