Anglo American eyes break-up as it fends off BHP offer

By Clara Denina and Felix Njini

LONDON (Reuters) -Anglo American laid out plans on Tuesday to refocus on energy transition metal copper while spinning out or selling its less profitable coal, nickel, diamond and platinum businesses, as it moves to fend off BHP Group's $43 billion takeover offer.

The announcement comes a day after the London-listed miner rejected its Australian suitor for the second time in less than three weeks, saying an increased proposal continued to significantly undervalue the company.

Anglo said on Tuesday it would divest its steelmaking coal assets, demerge its South African platinum unit, explore options for its nickel mines and divest or demerge diamonds business De Beers. The group expects the new configuration will lower costs by $1.7 billion.

"We expect that a radically simpler business will deliver sustainable incremental value creation through a step change in operational performance and cost reduction," Anglo CEO Duncan Wanblad said.

Anglo shares fell 3.2% to close at 26.19 pounds, after trading at the bottom of the London stock market's benchmark index FTSE 100.

Moving to drum up support for his proposal, BHP CEO Mike Henry said on Tuesday it was down to investors to weigh the merits of his company's offer for Anglo, adding he would have preferred to continue talking with Anglo in private.

"Our strong preference was to be able to hold these discussions with Anglo in private," Henry said. "Rather unfortunately, it got leaked."

BHP's 27.53 pound per share approach, raised from an initial 25.08 pounds, would require Anglo to sell its iron ore and platinum assets in South Africa, where it employs more than 40,000 people.

That has caused alarm in South Africa, where unemployment and a stagnant economy are major issues ahead of a May 29 election.

Wanblad said BHP's bid had forced him to accelerate plans for a spin-off of Johannesburg-listed Anglo American Platinum (Amplats).

Under Tuesday's plan, Anglo will keep its South African Kumba Iron Ore business, while Wanblad said the planned divestment of Amplats would be "completely different" in terms of time and complexity to the BHP proposal.

South Africa's mines minister Gwede Mantashe said on Tuesday he had no problem with Anglo's proposal, and that he hoped it would continue to resist BHP's bid.

Anglo is also exploring an initial public offering of its diamond business De Beers, two people familiar with the matter told Reuters on Tuesday, with one flagging London as the preferred venue. Anglo declined to comment.

The company also said on Tuesday it would slow the development of its Woodsmith fertiliser project in northeast England and seek strategic partners. First production at Woodsmith will be pushed back from 2027, Wanblad said.

The divestment of Anglo's steelmaking coal operations could move rapidly, he added, given available interest.

SELF-HELP

Anglo has been meeting investors since BHP's initial approach in April, and after a review of its assets initiated in February following a 94% plunge in annual profit.

One top 20 investor at Anglo, who said a deal with BHP was likely to lead to less copper being produced rather than the increase needed to accelerate the world's energy transition, welcomed Tuesday's proposal.

"At the moment, Anglo has lots of very interesting assets ... but it is not a focused business, focused on a clear strategic goal," the shareholder said. "This plan offers clarity of purpose."

MKP Advisers said however that the concern with the "self-help plan" will be that it is "too little, too late".

"There is no timescale attached to most of the plans and it has been clear to most that many of the potential disposals across the portfolio are simply tough to execute," MKP said.

Activist fund Elliott, one of Anglo's top 10 shareholders after building up a $1 billion stake, declined to comment on the plan. It is expected to put out a statement later in the day, sources say.

Developments such as artificial intelligence and automation, and the energy transition that includes electric vehicles and renewable energy, have driven up demand prospects for copper cable used to conduct electricity.

Copper prices have risen 25% from this year's Feb. 9 low to $8,127 a tonne.

Ashwin Pillay, senior associate at law firm Charles Russell Speechlys, said the new plan addressed shareholder concerns that the value of Anglo's copper mines has been suppressed by less valuable operations such as the diamond division.

"Intriguingly, there is still an opportunity for BHP to raise their offer further, including by adding a cash component, which would sweeten the pot," he added.

($1 = 0.7966 pounds)

(Additional reporting by Melanie Burton in Melbourne, Sinead Cruise in London and Eva Mathews; Writing by Jan Harvey; Editing by Nivedita Bhattacharjee, Kirsten Donovan, Sonali Paul, Catherine Evans and Emelia Sithole-Matarise)