Rebuffed for the second time, BHP walks away from Anglo American, leaving the path clear for $60 billion merger

By Jules Rimmer

Teck and Anglo shareholders will vote on their zero-premium transaction Dec. 9 - without any BHP interference.

Electrification trends and use in data centers for AI have made copper a highly sought-after commodity.

BHP on Monday disclosed it made a last-ditch and failed bid to buy Anglo American, setting the stage for a $60 billion merger to go through between Anglo American and Teck Resources.

It was the second rejection by Anglo American of BHP, after a first attempt in May 2024.

After spurning BHP's advances last year, Anglo American announced a proposed merger with Canada's Teck Resources in September that would value the pro forma entity at around $60 billion using today's share prices.

BHP confirmed in a statement Monday that it was "no longer considering a combination of the two companies". Under the stock exchange takeover rules in Britain, it's blocked from any further efforts for at least six months. Teck Resources itself was the subject of a bid from Glencore (UK:GLEN) in 2023, worth about $23 billion, that it rejected.

Anglo American shares (UK:AAL), up 17% this year, slipped 0.1%. BHP's (UK:BHP)(BHP) London-listed stock also drifted lower. Teck Resources (TECK) (CA:TECK.B) slipped 0.1% in premarket trade.

Reiterating a neutral recommendation on Anglo American, JPMorgan analyst Dominic O'Kane now believes the path is clear for Anglo and Teck shareholders to vote in favor of their merger on December 9. The impending transaction still requires regulatory approval in several countries including Canada, the U.S. and China.

Writing Monday, O'Kane argued that BHP's problem in executing the takeover was not simply the complexity of the deal, necessitating Anglo American to offload certain divisions, but also "how to mitigate the risk of value leakage" for BHP shareholders. This is partly because of Anglo American's strong relative outperformance since the first bid in 2024. It has increased by approximately a quarter since that time whereas BHP has lost around 10%.

Anglo American shares have re-rated since, he observes, to an enterprise value divided by earnings before interest, taxes, depreciation and amortization of between 8 and 10 times, a 50% premium to that commanded by BHP these days.

The proposed Anglo-Teck deal, uniting neighboring mines in China, would represent the second-largest in the sector - after Glencore and Xstrata merged in 2013 - and would establish the world's fifth-largest copper company. O'Kane writes that once the process is complete Anglo may still be "strategically vulnerable to inbound M&A" owing to its high-quality and large-scale assets.

Copper assets are highly prized right now because of their importance to booming electrification trends and diversification away from fossil fuels, as well as new applications from data centers for artificial intelligence.

So far this year Teck Resources share price is just under water, but it has added 20% since the Anglo deal was first mooted this autumn.

-Jules Rimmer

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