Mining giant BHP was last night told it will need to increase its bid for Anglo American after launching a £31bn “opportunistic” deal on rival Footsie.
The bid, which analysts say could “set the entire mining sector alight”, is the second for a FTSE 100 company this year and fueled fears about the health of the stock market amid a wave of takeover activity.
BHP, which left London for Sydney in 2021, hopes the mega-merger will boost its copper production.
But analysts believe that supply will need to be significantly improved. And investors branded the offer “opportunistic” due to Anglo’s “depressed” valuation.
The move also faced opposition in South Africa, where a political backlash threatens to derail any deal.
Bid: Mining giant BHP has been told it would need to increase its bid for Footsie rival Anglo American.
Mineral Resources Minister Gwede Mantashe said he was against the takeover and called his country’s experience with BHP “not positive”.
Anglo’s largest shareholder is South Africa’s state-backed Public Investment Corporation, giving Johannesburg a major say in proceedings.
Anglo shares soared 16.1 per cent, or 355 pence, to 2,560 pence.
The deal is just the latest offering from a London-listed company amid warnings that the stock market is in crisis.
DS Smith, another FTSE 100 company, has agreed a takeover by a US rival and offers are on the table for companies ranging from Virgin Money to Royal Mail owner International Distributions Services.
The approach also raises questions about which company will be next amid concerns that the London-listed shares are undervalued.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said the offer would “send a new chill through the town”.
Anglo is best known for its De Beers diamond brand and as owner of the Woodsmith mine in North Yorkshire.
Australia’s BHP, the world’s largest listed miner – and valued at almost £120bn – has its sights set on Anglo’s copper production.
The metal is used in everything from cars and power grids to building construction, and prices have soared 15 percent this year on expectations that it will be crucial to the energy transition.
Anglo shares are down 12 per cent in the last 12 months and under boss Duncan Wanblad, who takes the top job in April 2022, its shares have fallen 46 per cent. Other miners could jump in with a rival offer.
An alliance between the two would create the largest copper mining company in the world, with around 10 percent of global production.
“The energy transition is just beginning, and if electricity is the soul of this revolution, copper is the veins and arteries,” said Peter Arkell, president of the China World Mining Association.
Ben Cleary, portfolio manager at Tribeca Investment Partners, which owns shares in BHP and Anglo, said: “Anglo is obviously very much in play now and there is probably room for others to step in.” This is going to set the entire sector on fire.”
Under the proposal, Anglo American would have to spin off its platinum division and its Kumba iron ore business.
But Nick Stansbury, head of climate solutions at Legal & General Investment Management, Anglo’s 11th largest shareholder, told the Financial Times that BHP had taken a “highly opportunistic approach”.
Anglo’s board said it is reviewing the proposal and BHP has until May 22 to submit a firm offer.