The Zhitong Finance App learned that two sources revealed that the management of Angloy.US (NGLOY.US) did not consider the $39 billion acquisition proposed by BHP.US (BHP.US) attractive. Some investors and analysts consider BHP Billiton's offer to be speculative.
BHP Billiton proposed a purchase offer of £25.08 ($31.39) per share to Anglo-American Resources shareholders on Thursday, equivalent to US$38.8 billion, a 31% premium over Wednesday's closing price. BHP Billiton's proposal is conditional on Anglo-American Resources Group splitting the two assets first.
Sources said the offer did not resolve the complicated issues of the split between Anglo-American Platinum and Kumba Iron Ore.
BHP Billiton must submit a binding offer by May 22.
Anglo-American Resources Group, with a market capitalization of $36.7 billion, said it would evaluate the offer, but did not elaborate. The proposed merger will create a group that accounts for about one-tenth of the world's copper production. Copper applications in electric vehicles and new technologies such as automation and artificial intelligence are in huge demand.
When BHP Billiton proposed the takeover, Anglo-American Resources Group is continuing to conduct a strategic assessment of its assets. In February of this year, Anglo-American Resources Group began a strategic assessment of its assets to cope with a 94% drop in annual profit and a series of write-offs due to falling commodity demand.
One of the sources said that Anglo-American Resources Group management is continuing to “fully push forward” the review process.
The company is also always looking for other ways to strengthen its position.
Two people familiar with the matter said that in March, Anglo-American Resources Group chose investment bank RBC Capital Markets to launch a syndicate process for its expensive Woodsmith fertilizer project in north-east England, speeding up the search for investors to share the capital costs of $9 billion.
Another source said Anglo-American Resources Group is looking for a partner for its diamond business De Beers. BHP Billiton said De Beers will be evaluated after the transaction is completed.
At the same time, analysts also said that this offer may not be enough, and Anglo-American Resources Group's assets may be more suitable for other large mining companies.
“[BHP Billiton's] bid is not enough for the board or shareholders to cross the bottom line,” Liberum analyst Ben Davis said.
Deutsche Bank analysts said that for Rio Tinto (RIO.US) and Glencore (GLNCY.US), the “strategic reasons” for the merger may be just as strong.
“The offer proposed by BHP Billiton may stimulate other bidders to join the bidding framework,” they said.
Nichola Stein, portfolio manager at Coronation Fund Managers, who holds shares in Anglo-American Resources Group, is also not optimistic about BHP Billiton's proposal.
Stein said, “The offer seems quite speculative, especially when they say: get rid of the stuff we don't want... before we get rid of it... it can even go through, and on that condition.”