Activist Elliott said to build £800m stake in Anglo American after company rejects BHP’s ‘opportunistic’ bid

Mining giant Anglo American has rejected BHP Group’s £31.1bn proposal after it concluded the plan would undervalue its future prospects.

The talk of a potential mega-deal between BHP and London-listed miner Anglo American had the mining world’s attention this week, and it seems to have attracted the attention of activist investor Elliott Investment Management. Bloomberg has reported that the hedge fund, known for its activist campaigns, has acquired a $1bn (£800m) stake in the miner.

The news followed Anglo American’s announcement on Friday that it had rejected BHP’s proposal.

The announcement provided detail on the plan, which included an all-share offer for Anglo American by BHP and a requirement for Anglo American to complete two separate demergers of its entire shareholdings in Anglo American Platinum and Kumba Iron Ore to Anglo American shareholders.

The all-share offer and required demergers would be inter-conditional.

The Anglo American board concluded that the proposal significantly undervalued its future prospects.

The announcement followed warnings from South Africa’s minerals resources Minister, who said that his country’s previous experience with BHP was “not positive” in the wake of the group’s mega-deal bid for Anglo American.

In addition, the board believed the proposal contemplated a highly unattractive structure for Anglo American shareholders, given the uncertainty and complexity inherent in the proposal and significant execution risks.

Commenting on the news, Stuart Chambers, chairman of Anglo American said: “Anglo American is well positioned to create significant value from its portfolio of high quality assets that are well aligned with the energy transition and other major demand trends.”

The BHP proposal is opportunistic and fails to value Anglo American’s prospects, while significantly diluting the relative value upside participation of Anglo American’s shareholders relative to BHP’s shareholders.

“The proposed structure is also highly unattractive, creating substantial uncertainty and execution risk borne almost entirely by Anglo American, its shareholders and its other stakeholders. Anglo American has defined clear strategic priorities – of operational excellence, portfolio, and growth – to deliver full value potential and is entirely focused on that delivery,” he concluded.

Yesterday, South African minister Gwede Mantashe told the Financial Times that he did not back the £31.1bn bid as BHP’s 2001 merger with South Africa’s Billiton “never did much for South Africa.”

“What we saw is that it dumped coal and then created a small company called South32, which is now marginal,” he added, clarifying that his comments were not an official government position.