BHP has abandoned its pursuit of Anglo American today after the London-listed firm refused to offload its South African iron ore business prior to a deal and declined to extend takeover talks.
The news brings a close to a fractious bidding process in which BHP has failed to budge on the original terms of its bid, which required Anglo to carve-off its South Africa-based Kumba business.
Any deal would have marked the biggest mining merger in over a decade but the condition has proved a sticking point and irked Anglo’s biggest shareholder, the South African government. Anglo employs some 40,000 people in South Africa.
“While we believed that our proposal for Anglo American was a compelling opportunity to effectively grow the pie of value for both sets of shareholders, we were unable to reach agreement with Anglo American on our specific views in respect of South African regulatory risk and cost and, despite seeking to engage constructively and numerous requests, we were not able to access from Anglo American key information required to formulate measures to address the excess risk they perceive,” Mike Henry, BHP’s chief executive, said in a statement.
BHP’s abandonment of the deal will now mean it is barred from rounding with another bid for the company for six months.
BHP’s latest £39bn for Anglo American was rejected last Wednesday but the Aussie-listed group pledged a series of investment intitiatives this morning designed to assuage the fears of the South African government over the impact of the deal.
Among the commitments were a “Mining Centre of Excellence” to support research and development and “promotion of South Africa as a premier mining destination” and a three-year promise to maintain the current employment levels at Anglo American’s Johannesburg office.
However, fears were growing over the impact of the deal domestically in South Africa. Analysts at JP Morgan warned that a successful takeover of Anglo under BHP’s original terms could lead to a dent in the South African stock market and trigger outflows of $4.3bn from the country.
As BHP has been filing takeover bids, Anglo has been canvassing support from shareholders for its own break-up plan that will see it sell or demerge its 85 per cent stake in its mining operation De Beers and platinum arm Amplats.
Shareholders including South Africa’s Public Investment Corporation have backed the company’s break-up plans.