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It wants all of Anglo, just not its South African assets, which many have read as a vote against the country. from Moneyweb.

It may be a portfolio and commodity decision, but would BHP have made the same choice if Kumba and Angloplat were domiciled in another country? Image: Shutterstock

BHP CEO Mike Henry reportedly flew into SA on Thursday to sell his company’s $39 billion offer to buy Anglo – minus the SA assets (Kumba Iron Ore and Anglo American Platinum) – to shareholders, regulators and government officials.

Henry has his work cut out for him as the offer was rejected by Anglo American’s board last Friday (26 April) as too low, and the exclusion of SA-based assets Kumba and Angloplat from the deal is widely seen as a vote of no-confidence in SA.

He will have to contend with some long faces in Joburg. Mineral Resources and Energy Minister Gwede Mantashe said he would not support the current deal and that his department had not been contacted by BHP to explain its plans.

Also on Thursday, the Australian mining giant issued a “clarification statement” that the decision to exclude the SA assets from the deal – which would see Kumba and Angloplat demerged and their shares distributed to Anglo shareholders – is based on portfolio and commodity considerations and “does not reflect a view of South Africa as an investment destination”.

The clarification statement suggests BHP did not anticipate the kind of backlash it has received to the structure of the deal.

Kumba has had to scale back production and build up stockpiles because Transnet is unable to ship sufficient volumes to the port at Saldanha Bay. Angloplat faces a different set of challenges, including falling platinum group metal (PGM) prices.

“The structure of BHP’s proposal, including the proposed distribution of Anglo American’s shares in Anglo Platinum and Kumba to its shareholders, reflects the priorities for BHP’s portfolio and opportunity for synergies,” says BHP.

Not the end of the road for the orphan assets

The company adds that under the proposed structure, shares for Anglo Platinum and Kumba would continue to be listed on the JSE, and would be run by established South African-based management teams.

“The BHP Group has been listed in Johannesburg for multiple decades and intends to maintain its listing on the JSE,” it says.

“South Africa will continue under BHP’s proposal to benefit from Anglo Platinum and Kumba operating as independently listed South African companies investing in local operations, communities and jobs. BHP attaches great importance to creating social value for society and communities.

Read: Anglo spinoffs would ‘very likely’ require SA approval

“BHP believes this structure unlocks immediate value, delivering shareholders and stakeholders access to future growth opportunities and investment currently not available under the existing ownership structure.”


Bloomberg reports that Anglo’s unique mix of commodities – from diamonds to platinum, copper, iron ore, nickel and potash – is seen as a reason why the company hasn’t been a takeover target in the past.

Bidders prefer ‘pure play’ commodities focused on a single mineral or metal rather than diversified miners such as Anglo. While Anglo trades at roughly five times annual earnings, pure play copper miners trade at nearly twice this.

Even without the BHP bid, Anglo would have been under pressure to unbundle some of its more profitable businesses to realise the value that BHP believes it can uncork.

The real prize for BHP is Anglo’s South American copper businesses which would give the combined group control over roughly 10% of world supply.

As a standalone business, Anglo’s copper unit would probably be worth more than the current Anglo market cap, reports Bloomberg. That alone puts BHP under pressure to up its offer, and might tempt other bidders such as Rio Tinto and Glencore to enter the fray.

Read: What’s Anglo worth?

Anglo came onto the M&A radar after its price dropped since early 2022, trading at sometimes wide discounts to net asset value.

The share price spiked on the BHP bid, eliminating much of the discount.

Should a multi-way bidding war erupt, Anglo might find itself in the happy position of trading at a premium to net asset value.

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Anglo’s valuation has been savaged in part by its shareholding in Angloplat, which accounted for 12% of its cash profits in 2023, having fallen from 30% the previous year. Kumba has been unable to get sufficient iron ore to port because of Transnet’s well-publicised rail bottlenecks.

It makes sense that BHP would want to cauterise any further blood loss from these two companies. This may be a portfolio and commodity decision, as BHP says, but would it have made the same choices were Kumba and Angloplat domiciled in another country?