Over the years, Anglo American has been an important part of the fabric of South African business and society. One of the biggest mining companies in the world, it is now headquartered in London, but retains key business interests in South Africa, notably its iron ore and platinum businesses. BHP, the largest mining company in the world, recently proposed a takeover of Anglo American, which was ultimately turned down – for now.

Anglo still retains a significant South African shareholding, so local investors will want to know what went on in the takeover bid. And what would its impact on the local market be, if it were to be successful in the future?

The initial BHP–Anglo merger bid

BHP publicly proposed a £31 billion (about R727 billion) takeover bid for Anglo American in May 2024. It would have represented the biggest mining industry transaction in years, as BHP offered a share deal that valued each Anglo share at £25.08.

Analysts interpreted the BHP bid as an attempt to expand its portfolio of copper mines, as Anglo owns some of the sector’s most coveted copper mines in Peru and Chile. Copper is becoming an increasingly important metal for the decarbonisation of the global economy as it turns to renewable energy sources. Copper is also heavily used in the production of electric vehicles. The deal would have made BHP the world’s largest copper producer – they are currently the third-largest.

As part of the initial deal, BHP proposed spinning off 2 Anglo units – Anglo American Platinum, known as Amplats, and Kumba Iron Ore. Both are well-known listed companies in South Africa and account for about £10.2 billion (about R240 billion) of BHP’s total proposed valuation of Anglo.

BHP, an Australian business, dropped its primary listing in London in 2022. Anglo, founded 107 years ago, is among the 25 most valuable companies on the London Stock Exchange, and BHP’s proposal also fuelled anxiety over the flight of companies away from the UK capital. The bid was rejected by Anglo American on the grounds that it undervalued the company.

The second bid

In late May 2024, BHP returned to the table with an improved offer for Anglo, this time for £34 billion (about R800 billion). This was a 10% increase on the first offer and equal to a 15% increase in the merger exchange ratio, which would have lifted Anglo American shareholders’ aggregate ownership in the combined group from 14.8% to 16.6%. 

However, this revised bid again stipulated the sale of Anglo’s platinum and iron ore assets in South Africa. Analysts estimated that a divestment from Anglo’s other exposure to mining interest in diamonds, manganese and others, leading to a more focused copper mining business, meant that an offer around 13% higher would have been fair. Unsurprisingly, Anglo also rejected this offer.

That rejection signalled the end of the potential transaction – for now. BHP, it is reported, will reconsider an offer after 6 months, a time window stipulated by UK mergers and acquisition authorities. By that stage Anglo will have decided on its approach to underperforming parts of its portfolio, including the diamond business.  

Impact on investors

Anglo’s investors were concerned that they stood to lose heavily by holding shares in the South African subsidiaries if they were spun out, an anxiety shared by local investors. The global effects of a takeover or merger of this kind on the market would include:

• Stock price movement
  Takeover bids of this scale trigger volatility in stock prices. If BHP were to succeed with a future offer, Anglo’s stock price would likely surge. The deal falling through has already caused volatility as investors reacted to the news.
  
  
• Sector impact
  The mining and resources sector will see increased activity and interest due to the merger being announced and rejected. Anglo may well find its 700,000 tons-a-year copper production of interest to other large miners such as Glencore or Rio Tinto, all of which are eager to step up their interests in copper.
  
  
• Competition and consolidation
  News of BHP’s offer will have alerted the industry to the possibility of further consolidation, and the potential emergence of a dominant player with significant market influence.

Impact on South African investors

The impact of any future merger or takeover of Anglo would be significant for the local market, simply because Anglo’s biggest local shareholder is the Public Investment Corporation (PIC), the manager of government employee pension assets. The South African state-owned entity has around R2.5 trillion in assets under management. Through its investment in listed companies on the JSE, it controls about 10% of the bourse and invests internationally on the government’s behalf.

The PIC’s role extends beyond managing pension funds. It actively shapes investment strategies, economic empowerment, and growth in South Africa. The impact of any market volatility involving Anglo will therefore have a corresponding impact on many local investment funds in which the PIC is invested.

The merger could also have a negative effect on market liquidity. Anglo American is among the most actively traded shares locally, and its departure from the JSE would lower overall liquidity in a market that is already shrinking.

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