2024-05-20 14:52:26 ET
Summary
- BHP announced its intent to acquire competitor Anglo American to create the world's #1 copper producer in an offer valuing the company's equity at £27/sh.
- Mainly eyeing the copper assets, BHP intends to divest Anglo's South African businesses Amplats and Kumba, potentially looking to exit diamonds and coal down the line.
- While the divestment plan has drawn political criticism in South Africa, I estimate BHP could unlock significant value and effectively acquire the remaining Anglo assets at just 4x EBITDA.
- I see Anglo's fair value at £31.4/sh based on a SOTP valuation (~14% above BHP's revised offer) with an upside scenario indicating potential for up to £41/sh (~50% above offer).
- I view the deal as highly favorable for BHP in both financial and strategic terms, significantly increasing its copper exposure as well as adding nickel and manganese, materials crucial for the energy transition.
On April 24 , Australian mining giant BHP ( BHP ) announced what would be the largest deal in the sector since 2013's acquisition of Xstrata by Glencore. At an initial offer valued ~$39B (paid for in 100% stock at ~£25/sh) the company sought to take over one of its prime competitors in London-headquartered Anglo American ( AAUKF ). While Anglo's production is highly diversified with significant contributions from copper, iron ore, coal and platinum, BHP's offer mainly reflects its push to increase exposure to copper, a material critical in enabling the energy transition....
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BHP: Tremendous Value If They Get Anglo American At Current Offer Price