BHP (ASX: BHP) has withdrawn its proposal to buy Anglo American (LON: AAL) after the takeover target the world鈥檚 largest miner鈥檚 , and said that while it believes its bid was 鈥渃ompelling鈥�, the company is committed to a 鈥渄isciplined approach鈥� to mergers and acquisitions. 聽
鈥淏HP will not be making a firm offer for Anglo American,鈥� chief executive Mike Henry said published minutes before the 5 p.m. UK time deadline for the mining giant to make a formal bid. 鈥淲hile 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,鈥� Henry noted.
Anglo said after markets closed the company had set out 鈥渁 clear pathway鈥� to accelerate delivery of its strategy and 鈥渢o unlock significant value鈥� for its shareholders. 鈥淥ur shareholders will benefit from value transparency and undiluted exposure to a simpler portfolio of world class assets,鈥澛�.
Anglo鈥檚 refusal earlier in the day argued that BHP had failed to address its concerns over the 鈥渉ighly complex and unattractive structure鈥� of the proposed deal.聽
Analysts had warned that Anglo鈥檚 denial of BHP鈥檚 requested deadline extension indicated the mega deal was likely to be cancelled. RBC said in a note to investors on Wednesday the proposed $49.2 billion聽(拢38.6bn) takeover structure is too complex for BHP to go hostile.聽
鈥淚f BHP doesn鈥檛 launch a formal bid, it will be barred from buying Anglo for six months, unless a competing offer emerges,鈥� they wrote.
The mining giants had been in talks since May 22, when Anglo rebuffed BHP鈥檚 third bid, with the parties focused on finding a deal structure satisfactory to both.聽
BHP proposed a complicated transaction scheme, which remained the main bone of contention in the past five weeks of negotiations.
Anglo argued that the requirement to first spin off its majority stakes in two South African miners created excessive risk for its own investors, who would end up holding those shares. The target company wanted the suitor to either alter the structure of the proposal or compensate its shareholders for any loss of value as a result of the spinoffs.
BHP the risks associated with its takeover plan were 鈥渜uantifiable and manageable鈥�, adding that the costs of the proposed measures had already been incorporated into its offer.
鈥淲e 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,鈥� Henry said.
All about copper
BHP鈥檚 main interest in targeting Anglo was its copper mines. An electrified world has become increasingly dependent on battery metals, particularly on copper, and BHP was, not surprisingly, eager to secure a leading position in this market. A tie-up would have given the mining giant about 10% of global copper production at a time when copper prices are hitting record-highs. They have climbed about 23% so far this year.
A successful deal not only would have reshaped the mining industry, but would have also boosted BHP鈥檚 presence in the world鈥檚 top copper producing countries, Chile and Peru. This would have made it the world鈥檚 largest producer of the metal, far surpassing Codelco.
Anglo American, which traces its roots in South Africa to its founding 107 years ago, has come up with its own sweeping break up plan. This includes keeping its copper and iron ore assets, the two most profitable units, and reducing investments in its Woodsmith fertilizer project in northern England. Despite some investors urging Anglo to shelve or offload the project, the company is not ready to part ways with it. Instead, it plans to find strategic investors who can support the resumption of full-scale operations at Woodsmith聽starting in 2026.
BHP鈥檚 concessions
BHP had made some concessions to Anglo, hoping to reach an agreement. They included keeping Anglo鈥檚 office in Johannesburg fully staffed and listing BHP shares on the South African market. The company also mentioned its willingness to contribute to a potential increase in South African employee ownership of the two units, if it was necessary. These measures would have been upheld for a minimum of three years following the completion of the takeover.聽
Henry also expressed openness to negotiating a break fee in the event that regulatory authorities, including those in South Africa, block the potential deal.
According to UK regulations, BHP must now wait at least six months before thinking of approaching Anglo American again.