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BHP (ASX:BHP) share price on watch after third rejected offer for Anglo American

The BHP Group Ltd (ASX: BHP) share price is in focus after the ASX mining share announced it had made another offer for Anglo American plc (LON: AAL).

BHP’s third attempt at Anglo American

The big ASX miner was required to either announce a firm intention to make an offer for Anglo American or announce that it does not intend to make an offer by 5pm (UK time) on 22 May 2024, as per UK takeover law.

BHP revealed it made an “increased and final” offer ratio to the Anglo American board of directors.

The offer structure remains the same as the other offers – BHP’s bid is an all-share offer, but Anglo American must divest its holdings in Anglo American Platinum and Kumba Iron Ore.

BHP said it had been engaging with Anglo American and its advisors to help mitigate the concerns associated with the implementation of the structure that led to the rejection of the previous offer. The ASX mining share said it had made “progress” on these topics over the course of the engagement.

Updated offer

BHP is now offering 0.886 BHP shares for each Anglo American share. That would result in Anglo American shareholders owning approximately 17.8% of the combined BHP and Anglo American business.

Anglo American shareholders would also receive shares in Anglo Platinum and Kumba.

BHP suggested the final offer represents a total value of £31.11 per Anglo American share based on the closing BHP share price on 22 May 2024, and the calculated value of Anglo Platinum and Kumba on 21 May 2024.

BHP said the offer won’t be increased, but it reserves the right to increase the offer if another third-party bids for Anglo American, if the board of Anglo American announces the board would accept a better offer, or if the UK regulators provides its consent for BHP to make another offer.

The ASX mining share noted the combined business would have a leading portfolio of “large, low-cost, long-life tier 1 assets” focused on iron ore and metallurgical coal and future-facing commodities, including potash and copper. BHP said it would review Anglo American’s other high-quality businesses, including its diamond business, which would be subject to a review after the deal was completed.

Anglo American response

Anglo American board continues to believe there are “serious concerns” with the structure given that that it is “likely to result in material completion risk and value impact that disproportionately falls on Anglo American’s shareholders.”

The UK-listed miner said the condition to complete two demergers and a takeover is “unprecedented”, which would result in “additional material approvals and conditions, particularly in South Africa”. It could take “18 months or more to complete”

Anglo American suggested its own proposal to demerge Anglo American Platinum is simpler and can better unlock significant value.

Based on that, the board decided to reject the latest proposal. However, BHP has been given an extra week.

Final thoughts on the BHP share price

This is becoming increasingly expensive, if an offer is to be accepted. Large, high-quality copper deposits and mines are reportedly becoming harder to find – I understand why BHP wants this deal to happen so much.

But, future value can be dented if BHP overpays. I think it’s a good idea for BHP to reduce its level of earnings related to selling iron ore to China, but not at a price that’s too high.

There are other ASX dividend shares I’d be more interested in.

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