Anglo American set to be bought or broken up after rejecting £31bn BHP offer, investors believe

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Investors believe mining company Anglo American is set to be bought or broken up even after the 107-year-old London-listed group rejected a £31bn hostile takeover approach from Australian rival BHP.

Anglo on Friday said BHP’s indicative all-stock offer “significantly undervalues” the company and would be “highly unattractive” to its shareholders.

But investors including activist hedge fund Elliott Management are circling and Anglo chief executive Duncan Wanblad now faces a fight to keep the FTSE 100 company intact.

“I cannot see Anglo existing as an independent company by the end of the year in its current form,” said one top-10 Anglo shareholder.

The company’s position has been further complicated by US-based Elliott building up a $1bn stake using derivatives, roughly equivalent to 2.5 per cent of the company’s shares, according to regulatory filings.

Analysts and investors have predicted Anglo’s rejection of the offer will encourage competitors such as Glencore and Rio Tinto to table rival bids and BHP to improve its price. BHP has until May 22 to make a formal approach under UK takeover rules.

The move on Anglo represents the latest attempt by Melbourne-based BHP — known colloquially as “The Big Australian” in its home market — to reshape the global mining industry.

Under Mike Henry, the company veteran who was appointed chief executive four years ago, BHP has refocused its business on what it calls “future-facing” minerals, including copper and potash, while disposing of its oil and gas exploration assets.

The current all-stock approach excludes Anglo’s platinum and iron ore businesses in South Africa, which are independently listed in Johannesburg. BHP said, if successful, it would review Anglo’s other assets such as De Beers diamonds and manganese operations in South Africa.

South Africa’s ruling African National Congress, which is preparing for general elections in May, reacted with anger to the proposed break-up of one its most-storied companies.

“If [companies] don’t want South African assets, then they don’t want Anglo,” Gwede Mantashe, the country’s mining minister, told the Financial Times on Friday. “Anglo is a South African industry. Anglo isn’t a foreign entity. It was born and grew here, out of our cheap labour . . . so you can’t want Anglo and not want South Africa.”

Some large Anglo shareholders said this week they expected BHP to make a higher offer. As a result, BHP’s shares closed 4.6 per cent lower on Friday amid investor concerns about the company overpaying. The decline lowers the valuation of the bid from £31bn to under £30bn.

BHP declined to comment on Anglo’s rejection of its proposal.

Anglo’s share price rose a further 3.5 per cent on Friday on the news of the Elliott stake. They are up more than a fifth this week.