6 new stocks added last week by ProPicks AI are already up by 2.5%. Don't miss the momentum!Get 50% off

Anglo American: Jefferies downgrades to Hold as $49 bln BHP offer falls through

Published 2024/05/30, 04:08
© Reuters.

Investing.com-- Anglo American PLC (LON:AAL) was downgraded by Jefferies after a takeover attempt by mining giant BHP Group Ltd (ASX:BHP) fell through this week, with the brokerage citing potential risks as the copper miner undertakes a major restructuring. 

Jefferies downgraded Anglo’s London shares to Hold from Buy, and also cut the stock’s price target to 2,700 pence from 3,200 pence. The new PT represents an upside of about 9% from current levels. 

BHP dropped its $49 billion bid for Anglo this week after the London-listed copper miner rejected a last-minute request for more time to hash out a better deal. 

The key point of contention in the deal was BHP’s demands that Anglo offload its South African platinum and iron ore businesses, which Anglo found problematic. 

Jefferies analysts said that Anglo must now execute its own proposed restructuring, which includes a demerger of the South African business, a sale or spin-off of its De Beers diamond unit, a sale of its metallurgical coal business and a review of its nickel business. 

While the demergers and reviews do represent potential value, with Jefferies predicting a potential share price of 30.77 to 32.59 pounds from the de-mergers, it largely depends on Anglo’s ability to execute the restructuring without “significant value leakage.” 

De Beers presents the greatest risk, given that the diamond unit could be sold or spun-off at a much lower valuation, which could also be the case for the metallurgical coal unit. 

A demerger of Anglo’s South African assets is also expected to be rife with political and financial complexities, given that the assets face high regulatory risk in South Africa. 

Jefferies’ downgrade of the stock was based on these risks, with the brokerage forecasting that Anglo’s restructuring will likely take longer than expected, at least 18 months. 

But Jefferies analysts said they still expected a “considerably higher share price” from Anglo in the long-term. 

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.