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UK-listed mining group Anglo American plans to break itself up to win over shareholders as it seeks to fend off a £34bn takeover approach from rival BHP.
Anglo said on Tuesday that it would sell or demerge its De Beers diamond business, its South Africa-based Anglo American Platinum (Amplats) operation as well as its coking coal assets.
The London-listed group will instead focus on its copper, iron ore and crop nutrients businesses. BHP, the world’s biggest miner, has set its sights on securing Anglo’s copper business which is expected to boom as the world decarbonises.
Anglo’s chief executive Duncan Wanblad has been under intense pressure to set out the group’s future as a stand-alone group after rebuffing two preliminary offers from Australia-based BHP. Wanblad laid out his strategy hours before he and Mike Henry, BHP’s chief executive, were due to address a mining conference in Miami.
“These actions represent the most radical changes to Anglo American in decades,” Wanblad said.
The company founded 107 years ago in South Africa “is going to be extremely highly valued” by the end of 2025 when the restructuring was complete, he added in a media call. “To the extent that anybody wants to buy us at that particular point in time, they are going to have to pay an enormous amount of money for it.”
Speaking in Miami a few hours later, Henry said: “What we see today is some variant on the approach we’ve brought forward, which involves spinning out one of the assets, which I think is a pretty clear indicator it’s do-able.”
Shares in Anglo were trading down 3.4 per cent at £26.15 on Tuesday. BHP’s improved all-share offer valued Anglo at about £27.53, up from approximately £25 in its original bid. BHP shares were up 3 per cent.
South African mining minister Gwede Mantashe told the Financial Times that he would prefer Anglo’s restructuring plan over a BHP-driven split and takeover. South African state entity Public Investment Corporation, is the second largest shareholder in Anglo with a 8.4 per cent stake.
“I am happy with the rejection of the BHP deal and I hope it will continue, then Anglo can restructure itself to optimise value for shareholders,” Mantashe said.
Zwelakhe Mnguni, chief investment officer at Benguela Global Fund Managers, agreed Anglo break-up would be a better option for current investors.
“Anglo’s proposal keeps 100 per cent of the value unlock in the hands of its shareholders, as opposed to transferring some of that to BHP’s shareholders,” Mnguni said. “BHP has done a great job of stoking the fire at Anglo’s head office, but unless they pay us handsomely, they need to stand back now.”
Anglo also said it would pull back on spending on Woodsmith, a flagship project in the UK designed to create a vast underground mine producing a yet-unproven fertiliser. Instead of spending $1bn a year to build the mine by 2027, only $200mn will be spent next year and nothing in 2026.
Anglo shareholders have predicted that the group would struggle to sustain its current structure. They have long complained that the value of Anglo’s coveted copper mines in Latin America has been obscured by its other lacklustre operations, particularly its platinum and diamond divisions.
“BHP’s bids for Anglo revealed its preference to buy, not build, in copper,” says Django Davidson, partner at Hosking Partners, who has owned Anglo shares for a decade. “By breaking up the company and focusing on the copper business, Anglo clearly agrees with BHP on the longevity and amplitude of the copper capital cycle.”
As a condition to its bid, BHP has a provision requiring Anglo to spin off its two Johannesburg-listed subsidiaries, Amplats and iron ore miner Kumba.
Shares in Amplats, which produces a range of metals in South Africa, fell 7 per cent in Johannesburg on Tuesday.
“It’s a very balanced proposal and it makes a lot of sense,” said a top-10 shareholder in Anglo. “It’s a clear attempt by management to set the business up for success by focusing on a smaller number of things where they clearly have a competitive advantage with their assets.”
However the investor cautioned that “it will be a challenging path to deliver from here and we shouldn’t underestimate the execution difficulties”.
Anglo said it intended to keep Kumba as part of a “premium” iron ore division that would also include its Minas-Rio mine in Brazil.
“We remain in South Africa — that is an important point. BHP does not remain in South Africa. They exit. They make us do the work and off they go,” said Wanblad.
He warned that BHP’s proposal to demerge Amplats was “completely different in terms of time and complexity”.
Wanblad added that Anglo would rather have waited longer to reveal the restructuring plans because doing it ahead of crunch elections in South Africa would have been “completely disrespectful” to the government. However, the BHP bid forced the company to bring forward the announcement of its strategic plans, he said.
Alongside dismantling the structure it has maintained for years, Anglo vowed to cut a further $800mn of costs annually on top of $1bn already earmarked.
Anglo provided few details on where the cost savings would come from, saying it would “need to consider its global workforce arrangements to realise the opportunities for its employees and to ensure delivery of the accelerated strategy”.
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