Australian mining company BHP has set out plans for a £31bn takeover of rival Anglo-American in a deal which threatens to hasten the exodus of Britain’s largest companies 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 mining companies race to corner the market for copper, which is in high demand within the clean energy sector.
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 include copper mines in Peru and Chile.
“This is all about copper,” said Ben Cleary, portfolio manager at Tribeca Investment Partners, which holds shares in BHP and Anglo.
Copper is considered a key raw material in the race to cut carbon emissions 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. 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,” Cleary said.
The takeover bid would also “send a fresh chill through the City”, according to Susannah Streeter, head of money and markets at Hargreaves Lansdown. It comes as major FTSE-listed companies including oil company Shell have begun considering an exit in favour of a listing in the US.
Streeter added: “There are concerns that if the deal goes through it could be the tip of the iceberg and more giants could leave the exchange. It comes hot on the heels of speculation that Shell might up sticks and leave for New York, rumours that Ocado may be considering leaving for the Big Apple, and follows the crushing disappointment of homegrown chip designer Arm choosing the Nasdaq over the FTSE 100.”
BHP’s bid comes just two years after its shareholders voted overwhelmingly to drop its dual UK-Australian listing in favour of a home on the Sydney stock exchange – which it hoped would simplify the process of making major acquisitions.
BHP’s offer 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. The proposal ignited a 13% surge in Anglo’s share price to £24.89 in early trading in London.
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.
“The firm saw its market value shrink by 39% in 2023 due to operational setbacks, weaker commodity prices and downgraded production guidance. That provided an opportunity for a larger rival to pounce on the business, taking a long-term view that its assets have considerable value and any short-term operational issues can be fixed. BHP has been the one to step up to the plate,” Coatsworth said.
Under UK takeover rules, BHP has until 22 Mayto make a firm offer. Anglo American said in a statement that the 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.