The BHP Group Ltd (ASX: BHP) share price is under the spotlight after it revealed a huge takeover offer for Anglo American plc (LON: AAL).
BHP is a miner which is involved with a number of commodities including iron, copper, coal and nickel.
Takeover bid for Anglo American
BHP confirmed today it has made a proposal to Anglo American on 16 April 2024 to the board of directors.
The proposal is an all-share offer for Anglo American, as long as the UK-listed company divests its shareholdings in Anglo American Platinum and Kumba Iron Ore to Anglo American shareholders before the deal completes.
So, the proposal is that Anglo American shareholders would receive 0.7097 BHP shares for each Anglo American share, and ordinary shares in Anglo Platinum and Kumba.
Based on the market prices of 23 April 2024, which is the last day before media speculation, BHP said the offer is a total value of approximately £25.08 per Anglo American share, including £4.86 in Anglo Platinum shares and £3.40 in Kumba shares, valuing the business at £31.1 billion.
Anglo American’s other high-quality operations, including the diamond business, would be subject to a strategic review after completion of the deal.
At this stage, the proposal is non-binding and subject to customary conditions, including completing due diligence. Anglo American has been offered due diligence on BHP.
Why does BHP want to do this deal?
The ASX miner said this deal is consistent with its desire to create long-term value, and this deal is attractive for shareholders.
It would increase BHP’s exposure to future-facing commodities through Anglo American’s “world class” copper assets and provide increased diversification of the operating footprint.
Next, it would complement BHP’s iron ore and metallurgical coal portfolios with Anglo American’s high-quality iron ore operations in Brazil and Metallurgical coal assets in Queensland.
BHP also believes it can achieve “meaningful synergies”, meaning the combined business can have lower costs and make more profit together.
Final thoughts on the BHP share price
This seems like a smart move by the company, it could result in a significant increase of its copper exposure and grow the scale of the business. Copper has an appealing long-term outlook because of the world’s decarbonisation work, as well as an expected supply deficit for how much demand there is this decade (and beyond).
I wouldn’t call BHP a buy just because of this, I’d prefer to buy when the iron ore price is weaker. But, increased copper exposure seems like a good thing, so I’d be happy as a shareholder.
