Anglo American has snubbed a £31.1billion merger proposal from Australian competitor BHP, which would have created the world's largest copper miner.
The company's board declared on Friday that BHP's offer "significantly undervalues" the business and its "future prospects." They further criticised the unsolicited approach as being "is highly unattractive" for Anglo's shareholders "given the uncertainty and complexity inherent in the proposal, and significant execution risks".
The board said that it had unanimously rejected the proposal. Chairman Stuart Chambers saying: "Anglo American is well positioned to create significant value from its portfolio of high quality assets that are well aligned with the energy transition and other major demand trends. "
He added: “With copper representing 30% of Anglo American’s total production, and with the benefit of well-sequenced and value-accretive growth options in copper and other structurally attractive products, the board believes that Anglo American’s shareholders stand to benefit from what we expect to be significant value appreciation as the full impact of those trends materialises.”
The FTSE 100 mining giant announced on Thursday that it had been approached by BHP, causing its shares to rocket by around 16%. Despite describing the proposal as "unsolicited" and "highly conditional", Anglo confirmed on Thursday that it would consider it.
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BHP's bid would have seen them offering £25.08 for each share of Anglo American, which includes shares in subsidiaries Anglo Platinum and Kumba Iron Ore. The deal would hinge on Anglo separating its entire shareholdings in these two businesses to its shareholders.
BHP still has the opportunity to increase its offer or present the deal to shareholders. The merger of the two companies could result in the world's largest copper miner.
Combined, the two firms account for about 10% of global output. Copper is set to be a crucial metal in the future due to its excellent conductivity, making it an essential component in devices that will help shift the global economy from fossil fuels towards green electrical alternatives.
"The BHP proposal is opportunistic and fails to value Anglo American's prospects, while significantly diluting the relative value upside participation of Anglo American's shareholders relative to BHP's shareholders," continued Mr Chambers. "The proposed structure is also highly unattractive, creating substantial uncertainty and execution risk borne almost entirely by Anglo American, its shareholders and its other stakeholders."
He concluded: "Anglo American has defined clear strategic priorities, of operational excellence, portfolio, and growth, to deliver full value potential and is entirely focused on that delivery."
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