UPDATE 8-BHP makes $39 bln bid for Anglo American in mining shake-up

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Anglo's shares rise by 12.6% after London open

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Would be preceded by Anglo platinum, iron ore demergers

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BHP would gain access to more copper, potash, coking coal

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Australian miner has until May 22 to make firm offer

(Recasts with BHP statement confirming bid, share price)

By Melanie Burton, Scott Murdoch and Anousha Sakoui

MELBOURNE/LONDON, April 25 (Reuters) - BHP Group said on Thursday it had made a $38.8 billion bid for Anglo American, proposing a deal that would create the world's biggest copper miner and sending its smaller rival's shares sharply higher.

BHP said it will offer Anglo's shareholders 25.08 pounds per share, a premium of 31%, and carve out the London-listed group's iron ore and platinum assets in South Africa, where the world's largest listed miner has no assets.

Anglo, which owns mines in countries including Chile, South Africa, Brazil and Australia, said it was reviewing the unsolicited, non-binding and highly conditional proposal.

The proposed deal, if agreed, would create a copper mining group with around 10% of global output and also likely trigger further transactions in the global mining industry.

"This is all about copper," said Ben Cleary, portfolio manager at Tribeca Investment Partners, which holds shares in both BHP and Anglo.

The mining sector has seen a slew of mergers and acquisitions as companies review their assets to raise exposure to metals deemed critical to the global energy transition.

"I think it's a good deal for BHP. Anglo is obviously very much in play now and there's probably room for others to interlope. This is going to set the whole sector on fire," Cleary said of the BHP offer.

The proposal comes after Anglo, which had a market capitalisation of $37.7 billion as of Wednesday's close, began a review of its assets in February in response to a 94% plunge in annual profit and a series of writedowns due to a fall in demand for most of the metals it mines.

BHP, the world's biggest listed miner and best-known for mining iron ore, copper, coking coal, potash and nickel, had a market capitalisation of about $149 billion as of Wednesday.

COPPER FOCUS

The deal, if agreed, would give BHP access to more copper, one of the most sought after metals for the clean energy transition, and potash, which are its key strategic commodities, as well as more coking coal in Australia.

Technological developments such as artificial intelligence and automation, and the energy transition, which includes electric vehicles and renewable energy, have driven up demand prospects for copper cable used to conduct electricity.

Anglo has copper mines in Chile and Peru, where BHP also has operations, and their combined output would amount to around 2.6 million metric tons a year, pushing it well ahead of U.S.-based Freeport-McMoRan and Chilean state miner Codelco.

Copper prices on the London Metal Exchange have surged 15% this year, approaching $10,000 a ton and two-year highs on demand hopes sparked by encouraging macroeconomic data, U.S. rate cut bets and speculative trading.

Supply bottlenecks driven by the forced December shutdown of Cobre Panama, one of the world's largest open-pit copper mines, are also fuelling the gains.

Anglo's 2024 copper production guidance is 730,000 to 790,000 tons. BHP is targeting copper production of between 1.7 million and 1.9 million tons for the 12 months ending in June.

ASSET CARVE-OUTS

Anglo said the proposal would be conditional on being preceded by separate distribution of its entire stakes in Anglo American Platinum and Kumba Iron Ore to its shareholders, which would significantly lower its exposure to South Africa.

Anglo's stakes in the platinum and iron ore miners are worth $7.44 billion and $5.4 billion respectively, according to LSEG data based on Wednesday's close of trade.

"Anglo would be a good strategic fit for BHP or another major miner due to potential synergies, asset quality, and commodity exposure (especially copper)," Jefferies analysts said.

"Anglo consists of an undervalued portfolio of multiple tier-1 assets... Anglo could be a compelling fit," they said in a note, adding it could take a premium of around 28% above Anglo's most recent share price to get the deal across the line.

Analysts expected the deal could also trigger a wave of transactions for any other unwanted assets such as nickel, manganese and diamonds, where Anglo owns 85% of industry giant De Beers.

Anglo said its board was reviewing the proposal. Under UK takeover rules, BHP has until May 22 to make a firm offer.

The combined coking coal assets of the two miners, both in Australia's Queensland state, could also be subject to regulatory scrutiny given the deal would merge two of the biggest producers in the global seaborne market.

If the Anglo deal came to fruition, it would be the second major acquisition for BHP in about a year after its 2023 purchase of copper miner Oz Minerals and adds to a frenzy of global M&A activity.

Recent mega-deals in the mining sector include gold giant Newmont's $16.8 billion buyout of Australia-based Newcrest Mining late last year.

If completed, the deal would likely be among the 10 biggest-ever mining deals by value and has the potential to delist Anglo from the London market, a fresh blow to an exchange that is struggling to retain big companies and attract IPOs. ($1 = 1.5396 Australian dollars)

(Reporting by Melanie Burton in Melbourne, Scott Murdoch in Sydney and Anousha Sakoui in London; Additional reporting by Clara Denina, Rishav Chatterjee in Bengaluru, Siyi Liu in Beijing and Mai Nguyen in Hanoi; Writing by Miyoung Kim; Editing by Jamie Freed and Alexander Smith)