BHP makes $38.8bn bid for Anglo American; analysts think improved offer is needed

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BHP makes $38.8bn bid for Anglo American; analysts think improved offer is needed
Credit: © Reuters.

BHP Group (NYSE: BHP ) said on Thursday it has made a takeover bid for Anglo American (JO: AGLJ ) of $38.8 billion, a move that would position the combined entity as the world's largest copper producer.

BHP's offer of 25.08 pounds per share represents a 31% premium and includes plans to divest Anglo American's iron ore and platinum operations in South Africa, regions where BHP currently has no presence.

Anglo’s shares popped nearly 13% in London trading Thursday.

Anglo American, with mining operations across Chile, South Africa, Brazil, and Australia, is currently evaluating the offer.

If finalized, the combined company would control approximately 10% of the global copper market, potentially setting off additional mergers and acquisitions within the mining sector.

This proposal arrives at a time when Anglo American, which had a market value of $37.7 billion as of the last trading session, is undergoing an asset review initiated in February following a significant drop in annual profit by 94% and multiple asset writedowns driven by decreased demand for its mined metals.

Commenting on this development, analysts at Jefferies believe BHP will have to offer at least 25 pounds per Anglo American share before the company “would seriously consider an offer.”

“If Anglo rejects this offer, the question then is whether BHP comes back with something better,” said analysts.

“Either way, we would expect Anglo's defense to include possible asset sales and/or demergers to unlock SoTP value,” they added, reiterating a Buy rating on Anglo.

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