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Legal & General Investment Management, one of Anglo American’s largest shareholders, has come out in support of the miner’s break-up plan as BHP has just two days to either raise its takeover bid or walk away.
London-listed Anglo said last week that it would break itself up as it tried to convince shareholders that it had an attractive future as a standalone group after rejecting two offers from BHP.
Under the radical plan, Anglo would hive off its De Beers diamond and South Africa-based Anglo American Platinum businesses as well as its coking coal assets. The group would instead focus largely on its iron ore and copper assets, which are coveted by BHP.
“The plan outlined by Anglo American is a radical but attractive strategy to create value for long-term investors,” said Nick Stansbury, head of climate solutions at LGIM, which is a top 10 investor with slightly less than 2 per cent of Anglo’s stock.
“We agree the execution of this plan will be challenging for management to deliver on, but we are confident in their ability to do so over time.”
BHP’s second all-stock proposal valued Anglo’s shares at £27.53 and the company at £34bn, up from approximately £25 a share, or £31bn, in the first approach.
Under UK takeover rules, BHP has until 5pm on Wednesday to lodge a formal offer or walk away, giving the board of the world’s largest miner hours to make a last-ditch effort to bring Anglo to the negotiating table.
Stansbury of LGIM, which also holds almost 1 per cent of BHP shares, said that the pair of proposals from BHP “are far from reflecting fair value for the business. For a takeover offer to be attractive an offer would need to be at a reasonable premium to fair value.”
Anglo has said the bids “significantly” undervalue the company and are “highly unattractive” for shareholders, in part, because they require its South Africa-based platinum and iron ore divisions to be demerged as part of the deal.
Analysts at JPMorgan last week said a takeover premium of between 10 per cent and 30 per cent on its estimate of Anglo’s fair value would require an offer of between £30.50 and £36.
A recent bounce in BHP’s shares has helped push the value of its second bid towards £30. Shares in Anglo were trading at £26.90 on Monday.
The pursuit of Anglo has been rancorous, with BHP chief executive Mike Henry voicing disappointment at Anglo’s refusal to engage in negotiations.
LGIM’s Stansbury said the asset manager’s discussions with Anglo indicated that the mining company’s board was “acting appropriately with regards to the level of engagement they are having with BHP”.
He added: “We do not see a clear reason for the Anglo board to change their stance in this regard unless an offer that represents a reasonable premium to the underlying fair value of the assets Anglo holds is proposed.”
However, some Anglo investors remain sceptical that the miner can execute its ambitious break-up.
“Anglo would be hard pressed to execute a break-up of the company in a clean and timely manner,” said an investor who owns shares in both Anglo and BHP.
“I would back BHP to execute on that and unlock more value . . . it comes down to which management team you back to execute on a break-up.”
BHP and Anglo American declined to comment.