The Australian mining company BHP has set out plans for a £31bn takeover of rival Anglo-American in a deal that threatens to hasten the exodus of Britain’s largest firms from the City of London.
The proposed takeover of London-listed Anglo would rank as one of the biggest deals in the global mining industry in the last decade and comes as miners race to corner the market for copper, which is in high demand within the clean energy sector.
However, within hours of the proposal emerging the deal had attracted criticism from some of Anglo American’s biggest investors including the South Africa’s government, throwing up a potential obstacle to the BHP plans.
The South African mining minister, Gwede Mantashe, told the Financial Times he was against the takeover plan because of the country’s previous experience with BHP was “not positive”, although he stressed this was not an official government position. The state-owned Public Investment Corporation (PIC) is Anglo American’s biggest shareholder and a significant number of the company’s mines are located in the country.
Shareholders in London dismissed the BHP offer as too low. Legal & General Investment Management, one of its largest investors, described the approach as “highly opportunistic” and “unattractive” because it undervalued the long-term prospects for Anglo American.
BHP moved its primary listing from the UK to Australia in 2022, and the takeover of Anglo American, should it proceed, would mean the London Stock Exchange losing one of its 25 largest companies. In another blow for the City, Unilever indicated on Thursday it was considering an Amsterdam listing for the demerger of its €17bn (£14.6bn) ice-cream business, which includes the Cornetto, Ben & Jerry’s and Magnum brands.
Hein Schumacher, the chief executive of the consumer goods group, said he was “talking to many different stakeholders in the process” and had held talks with the Dutch economic affairs minister. However, he did not confirm whether he met the equivalent UK minister, raising fears that London could miss out.
There has been much handwringing in the City and Whitehall over an exodus of listed firms. Those leaving include the travel group Tui, which will shift its listing to Germany, and the Dublin-based betting firm Flutter, which is asking shareholders to consider moving its shares to the US. Shell has stoked speculation it could switch to New York, while oil rival BP has been named as a potential takeover target.
Amid the growing concerns about the City’s future as a leading capital market, shareholders in London Stock Exchange Group met on Thursday to vote through a controversial renumeration plan that doubled the maximum pay levels of its chief executive, David Schwimmer, to more than £13m a year. The resolution passed, with nearly 89% voting in favour of the new pay policy.
Schwimmer tried to appear upbeat, telling shareholders the pipeline of floats was “encouraging” and that a pending shake-up of listings rules, which include simplifying some requirements for companies, would be helpful. “We are very pleased with the direction of travel for the London market,” he said.
However, Susannah Streeter, the head of money and markets at Hargreaves Lansdown, said the BHP offer “will send a fresh chill through the City of London”.
Streeter said: “There are concerns that if the deal goes through it could be the tip of the iceberg and more giants could leave the exchange.”
Anglo American has seen its market value plummet in recent years, making the miner a “sitting duck” for a takeover bid from larger rivals, according to Dan Coatsworth, an investment analyst at AJ Bell.
BHP, which has a market value of AUS$229bn (£119bn) told investors the deal would increase its “exposure to future-facing commodities through Anglo American’s world-class copper assets”, which includemines in Peru and Chile.
“This is all about copper,” said Ben Cleary, a portfolio manager at Tribeca Investment Partners, which holds shares in BHP and Anglo.
Copper is considered a crucial raw material in the low-carbon energy transition because it is essential in manufacturing components for renewable energy projects and electric vehicles. Demand has climbed in recent years, and is expected to rise by 20% globally by 2035.
“I think it’s a good deal for BHP,” said Cleary of the proposed takeover. “Anglo is obviously very much in play now and there’s probably room for others to interlope. This is going to set the whole sector on fire.”
BHP’s bid values each Anglo share at £25.08 to give the owner of the world’s biggest diamond company, De Beers, a valuation of almost £31bn. Anglo’s share price closed more than 16% up on Thursday at £25.60.
Under UK takeover rules, BHP has until 22 May to make a firm offer. Anglo American said its board was reviewing the proposal but there could be no certainty that a firm offer would be made, or on the terms that it might be made.
