Anglo leaves door open to engage with BHP after spurning third offer

By Clara Denina and Felix Njini

LONDON (Reuters) -Anglo American has agreed to a one-week extension for BHP Group to make a binding takeover offer, it said on Wednesday, after rejecting a third proposal from its rival that valued it at 38.6 billion pounds ($49.18 billion).

BHP, the world's biggest listed mining group, has now made three unsuccessful offers in a month for Anglo, which has itself outlined a plan to divest its less profitable coal, nickel, diamond and platinum businesses.

The structure of any deal and the fate of Anglo's businesses in South Africa remain big obstacles, with Anglo chairman Stuart Chambers highlighting concerns about completion and execution risks in BHP's proposal.

"The conclusion here appears to be clear - this new proposal was rejected by Anglo on grounds of structure rather than price," said Mark Kelly at MKP Advisors.

Nicholas Stein at top-20 Anglo shareholder Coronation Fund Managers, however, said that "investors are skeptical the BHP deal is enough to get it over the line."

BHP's 29.34 pounds per share approach, based on undisturbed share prices at market close on April 23 and raised from an initial 25.08 pounds, is still conditional on Anglo unbundling its platinum and iron ore assets in South Africa, where it was founded and still has deep roots.

Anglo said that process could take about 18 months, by which time it expects its own restructuring to be completed.

"(The proposal) consequently has the potential for material value leakage to be disproportionately suffered by Anglo American's shareholders," Chambers said.

Anglo's shares closed up 0.4% at 26.98 pounds.

BHP said the ratio of shares it is offering Anglo shareholders is "final", unless there is an offer from a third party or if the board of Anglo is "minded to recommend an offer on better terms".

"None of the conditions have been met at this point in time, and this has to be considered the 'Final Ratio', RBC Capital Markets analyst Kaan Peker said.

It may mean BHP can make a supplementary cash offer, Peker added.

The South African government has been paying close attention to BHP's proposed Anglo deal, and the new deadline of May 29 is the date of a national election there.

Anglo employs more than 40,000 people in South Africa, where mining companies have been cutting jobs and investment, as platinum especially falls out of favour.

South Africa's Public Investment Corporation had earlier said that BHP should consider revising its initial proposal.

"A meaningful revision of the current BHP proposal ... should take into consideration the material risks that current shareholders of both Anglo and its subsidiaries would have to assume over an extended time frame," said Abel Sithole, the CEO for PIC, Anglo's second-largest shareholder.

Analysts at JP Morgan have said BHP would need to boost its offer by around 30% to reflect fair value for Anglo and its prized copper assets in Chile and Peru.

Artificial intelligence and automation, and the energy transition, including electric vehicles and renewables, have driven up demand prospects for copper cable used to conduct electricity.

Anglo began reviewing its assets in February following a 94% plunge in annual profit.

Activist fund Elliott Investment Management has built a 3.2% stake in Anglo, making it one of the miner's top 10 shareholders. Elliott has yet to publicly comment on its Anglo investment.

BHP has increased its advisory firepower on its bid, adding Lazard to existing advisers Barclays and UBS.

($1 = 0.7849 pounds)

(Reporting by Clara Denina and Felix Njini; additional reporting by Anousha Sakoui; Editing by Veronica Brown, Shinjini Ganguli, Kirsten Donovan and Jane Merriman)