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Amidst forecasts that Melbourne-headquartered BHP (ASX: BHP) will overtake Chilean state-owned Codelco as the world's leading copper producer this year, Australia's largest miner is out to reinforce that position with a £31.1 billion ($59.5 million) non-binding takeover offer for rival Anglo American (LON: AAL).
If successful, the share-based offer would give the target's shareholders 0.7097 BHP shares for every Anglo American share held, as well as a spin-off of Anglo's platinum and iron ore businesses in South Africa.
When accounting for these two South African businesses that would remain in Anglo American shareholders' hands, the amount to be forked out by BHP for the takeover would be closer to £20.8 billion ($39.87 billion) plus the costs of such a sizeable undertaking and restructuring.
BHP's announcement yesterday highlighted the offer implies £25.08 per Anglo American share, representing a premium on the implied market value of Anglo American’s unlisted assets of approximately 31 per cent.
The Australian suitor - which also has global listings on the ASX, LSE, JSE and NYSE - notes the combined entity would "have a leading portfolio of large, low-cost, long-life Tier 1 assets focused on iron ore and metallurgical coal and future facing commodities, including potash and copper."
"These would be expected to generate significant cash flows and the combined entity would have the financial capacity to support value adding growth projects at the optimal time, while continuing BHP’s commitment to shareholder returns," the company states.
"The combination would also deliver meaningful synergies, including sharing best practice, creating procurement, operational and marketing synergies and eliminating duplication, which would enhance profitability and value for Anglo American shareholders.
"The proposal would provide Anglo American shareholders with the benefits of directly holding their interests in Anglo Platinum (78.6 per cent), the world’s leading PGM miner, and Kumba (69.7 per cent) as shareholders, including enabling direct access to the future value generation and dividends of Anglo Platinum and Kumba."
Kumba accounted for roughly 60 per cent of Anglo's iron ore business in FY23 - its leading source of earnings - with the remainder coming from Brazilian operations.
Not far behind is copper, coming from Chile and Peru, accounting for 32 per cent of earnings at US$3.23 billion, followed by the steelmaking coal business in Queensland with a 13 per cent share at US$1.32 billion.
Anglo has 3,600 employees in Australia, representing its second-largest jurisdiction in terms of wages paid at US$629 million.
BHP has also indicated plans to conduct a strategic review post-completion of Anglo American’s other high quality operations including its De Beers diamond business, which brought in US$72 million in earnings in the last financial year.
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