BHP proposes mining consolidation with Anglo American

Australian mining giant Broken Hill Proprietary Company Limited (BHP) has proposed to take over smaller peer Anglo American in an all-share deal that values the company at $38.9 billion (£30.1 billion), but Anglo has rejected the offer.

The merger proposal has been opposed by coking coal users and the South African government, although some shareholders of the company in South Africa have, reportedly, been supportive of the proposal.

BHP, however, is not interested in Anglo American’s South African assets and the proposal is anchored on Anglo divesting its South African operations. 

Anglo American holds controlling stakes in some of South Africa’s platinum and iron ore companies. The London-listed company is also the world’s largest platinum miner.

A merger of the two would create a mining behemoth with near monopoly in copper, platinum and coking coal, besides realigning the mining industry worldwide.

A merger will also make BHP the controlling power in the coal sector in Australia, which in turn is the world’s top exporter of coking coal. Opponents of the merger fear that a revised offer by BHP may make the offer compelling for Anglo American and its shareholders.

BHP has offered about £25.08 per share of Anglo American, which is a 14 per cent premium to Anglo’s closing share price on Wednesday, according to BHP.

Media reports have suggested that some South African shareholders of Anglo American are open to an acquisition by BHP, but want it to modify the offer with a cash component.

These shareholders, reportedly, hold a combined 15 per cent interest in Anglo American. 

The prospect of a merger of the two mining giants has unnerved Japanese steelmakers who source much of the inputs for steelmaking from Australian mining companies, mostly from Queensland, where both BHP and Anglo American operate large coal fields. 

Japanese steelmakers depend on Australia for nearly 60 per cent of their coal requirements.

Reports also said the British-Australian group, Rio Tinto, the second-largest metals and mining company after BHP, had also considered a bid for Anglo American.