Analysts highlight concerns over valuation, regulatory hurdles in BHP-Anglo proposal
The rejection – for the second time – of BHP’s attempt to propose a deal with Anglo American underscores the concerns that continue to persist regarding value and regulatory hurdles in the proposed transaction.
Responding to the latest developments in the BHP-Anglo takeover, CreditSight analysts Wen Li and Michael O’Brien assert that the revised bid price proposal still falls short of reflecting Anglo’s value.
BHP increased its proposal to $34.6 a share (£27.53), from an initial $31.40 a share ($25). CreditSights estimates Anglo’s value around $39 a share.
“Anglo appears to be holding out for a better deal and raises several valid points,” note Li and O’Brien.
One of the primary concerns highlighted by the analysts revolves around the proposed demergers of Anglo’s platinum group metals and iron-ore units in South Africa. This aspect of the proposal introduces additional layers of complexity and uncertainty, particularly as these demergers will be subject to regulatory risks.
“The South African government may be reluctant to approve the deal,” caution Li and O’Brien.
Further, the analysts are wary of potential shareholder reluctance to retain shares in Anglo American Platinum and Kumba Iron Ore post-demerger, which could trigger a sell-off and exert downward pressure on those shares.
In their commentary, titled ‘Grab your Popcorn’, Li and O’Brien say Tuesday’s Bank of America Global Metals, Mining and Steel conference could be a showdown between the mining titans. Both are slated to present at the conference in Miami, US.
Anglo is expected to discuss accelerated restructuring plans aimed at fortifying its position and preserving independence, while BHP will attempt to persuade shareholders of the benefits of the deal.
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