Anglo American’s South African investors are ready to offer an improved BHP bid

Stay up to date with free updates

Simply sign in Mining myFT Digest — delivered directly to your inbox.

Anglo American’s key South African shareholders are open to a takeover offer from BHP, despite government concerns that Miner’s proposal worth more than £30 billion is bad for Africa’s most industrialized economy.

The investors, who together hold more than 15% of Anglo’s shares, told the Financial Times that BHP would need to sweeten its offer but that they were not opposed in principle to a takeover by the Australian group.

Their openness comes despite comments from mining minister Gwede Mantashe saying he was personally “negative” about the deal that would separate the two South African subsidiaries.

London-listed Anglo has been tied to the South African economy throughout its 107-year history and the takeover is a sensitive issue for the ruling African National Congress in an election year . The local competition regulator has warned that it will have the final say.

But David Masondo, South Africa’s deputy finance minister and chairman of the Public Investment Corporation, which owns 8.4% of Anglo, said the state-owned entity had yet to take a position on the initial proposal. “We will need to evaluate any offer and assess the value it brings,” he said. But he added that it would “look more favorable for PIC to offer a higher price”.

Other local fund managers said the complexity of the deal structure – which involves splitting up Anglo’s South African iron ore and platinum businesses, Amplats and Kumba – required even higher premiums. higher than buying the entire business.

Dawid Heyl, a fund manager at Ninety One, which owns 2.1% of Anglo, said a proposed deal could be reached, but the price would have to be “significantly” higher.

“However, it would be easier if BHP went back to a higher and simpler price, removing the Amplats and Kumba scrapping condition, which would make things more complicated,” he said.

Karl Leinberger, chief investment officer at Coronation Fund Managers, which owns 1.2% of Anglo, said they would “definitely” consider a higher price. But he warns that “if BHP only wants trading profits, for example, while leaving shareholders at risk of other assets, they will have to pay more for that”.

UK-based M&G Investments, which owns 1.4% of Anglo, said it also “would support” if a proposed deal delivered better value for its funds.

The row comes as BHP is preparing a formal offer that could turn the iron ore, coal and nickel producer into a mining supermajor, with Anglo’s coveted copper mines in Latin America being main prize.

Calling for a better bid will also test BHP’s resolve to avoid overpaying later Anglo rejected the initial proposal last month priced it at £25 a share as “very unattractive” to shareholders.

According to a person familiar with the company’s thinking, BHP is unlikely to sharply increase its offer in its formal bid, which is due on May 22 under UK takeover rules, and the company has little ability to higher increase capacity. Anglo shares are currently trading at £26.57 a share.

The deal, initially worth £31bn, would be the biggest in the mining industry if successful and is a bet on the importance of copperare expected to experience shortages as demand for renewable energy, power grids and electric cars surges.

Bankers speculate that the bid could take place before an industry event in Miami next week, which would attract the attention of Anglo chief executive Duncan Wanblad.

A formal offer by BHP would increase pressure on Anglo’s board to communicate its own plans to reshape the company and regain investor confidence.

Some Anglo shareholders are backing BHP to add a cash component to the offer. Andrew Snowdowne, fund manager at Sanlam Investments, which owns 1% of Anglo, said “the inclusion of a cash component to the offering will be positively received by the market as it helps establish the minimum buyback price in case BHP shares decline. ”.

BHP is not yet at the stage where it will add a cash component to its offer because of the large overlap in the shareholder bases of the two companies, although it could be later if necessary, according to a person familiar with the thinking. BHP’s thinking. The Australian miner also objected to Anglo’s South African assets being included in the bid because they did not fit into the company’s strategy, according to another person.

Anglo and BHP declined to comment.