Melanie Burton
MELBOURNE (Reuters) – BHP Group asked for more time on Wednesday to try to secure a takeover of Anglo American (JO:), hours before a deadline for the world’s biggest miner to approve its $49 billion bid for its smaller rival .
Anglo rejected three offers from BHP but last week agreed to a one-week extension to the deadline set by Britain’s takeover watchdog to allow BHP to make a formal offer or walk away.
In a statement to the Australian Securities Exchange, BHP said it was prepared to offer Anglo a deferment if the deal was blocked for antitrust reasons or failed to receive regulatory approval, saying it was confident it had quantified and managed such risk.
The company also announced a series of steps aimed at alleviating concerns that Anglo will sell off some South African assets before the takeover occurs, which has been one of the main sticking points in the negotiations.
“Today’s announcement tells me that BHP is doing everything it can to allay any concerns the Anglo board has regarding employment in South Africa and from a regulatory perspective,” said analyst Hayden Bairstow at brokerage Argonaut in Perth.
“They say, ‘Can we just extend this another week and lock everything down?’ and I think that’s exactly what will happen.”
Anglo was founded in Johannesburg in 1917 and employs more than 40,000 South Africans, so any exit would be a further economic blow to the country, whose mining companies are cutting jobs and investment as platinum especially falls out of favor.
South Africans vote in elections on Wednesday. Polls show the African National Congress could lose its majority after 30 years in power, partly due to dissatisfaction with high unemployment and a stagnant economy.
Analysts at JP Morgan estimate that BHP’s takeover of Anglo could lead to an outflow of $4.3 billion from South Africa and a weakening of the rand.
BHP said on Wednesday it would make socio-economic responsibilities to South Africa, which include sharing the costs associated with increasing the employee share of Anglo’s assets in the country, as well as maintaining employment levels at Anglo’s Johannesburg office.
OPTIONS
Anglo last week extended BHP’s initial deadline of May 22 for a binding bid by seven days until 1600 GMT Wednesday, after rejecting a third takeover bid that it deemed too difficult to execute.
Anglo had no immediate comment on the Reuters report.
If Anglo does not agree to the extension, BHP will have to walk away or wait six months to make another approach – unless a rival bidder emerges – once the deadline expires.
BHP shares closed unchanged at A$45.08 per share on Wednesday. Anglo shares were down 1.4% at 25.23 pounds by 0753 GMT.
BHP’s last-minute request came after the miner was struggling to find common ground with Anglo by Tuesday, five sources told Reuters, without any new concessions on structure or cost.
BHP Chief Executive Mike Henry is holding firm to the structure and value proposition of his latest takeover bid, focusing instead on mitigating concerns over execution risk.
That risk includes provisions for black empowerment in South Africa, which include local ownership and job security for workers in a country with an unemployment rate of more than 30%, making it a key election issue.
There was also disagreement over whether there were enough buyers for Anglo’s 69.7% stake in Kumba and 78.6% in platinum company Amplats, said the investor, who asked not to be named because the matter is sensitive.
“While the measures announced today should mitigate some of the risks associated with the deal structure, the press release did not quantify the costs associated with them, making it difficult to estimate the value of BHP’s offer,” RBC Capital Markets analysts said in a note.
“Anglo is unlikely to accept last week’s offer unless the structure changes or higher compensation is offered,” RBC said, adding that the market expected a further extension.
The initial impression from BHP investors was that it was more important for the mining company to maintain capital discipline to ensure Henry’s reputation was not tarnished by a failed takeover attempt.
“I would be happy for BHP to leave if negotiations cannot proceed in good faith; As much as I would like to see the merger go ahead, I think some discipline is warranted,” said the Wilson Asset Management executive. portfolio manager Matthew Haupt, a BHP shareholder.
“I think BHP acted in good faith and put forward a serious offer and it is now up to Anglo to get involved and get the deal done.”
($1 = 0.7845 pounds)