Anglo American: Cherry picking by BHP
BHP has made a proposal to Anglo American (AAL) for an all-share offer and is especially interested in the Peruvian and Chilean copper assets as well as the Australian met coal assets. Thus, the deal is subject to the pro-rata distribution by Anglo American of its shareholdings in Anglo American Platinum and Kumba Iron Ore to AAL shareholders. AAL shareholders would receive 0.7097 BHP shares for each ordinary share in AAL implying a valuation of GBP 31 billion. Today AAL shares are up nearly 14% and market cap rose to about GBP 30.7 billion or GBP 25 per share. Thus the shares now trade close to the offer price. The board confirmed that its board is reviewing the proposal and already earlier embarked on a review of PGM, diamonds and irone ore divisions. If the deal is completed, then BHP would become the largest copper producer in the world with around 10% of global mine supply. Given the large size, regulators and competition authorities will have a closer look and could spark a long evaluation process. Copper is an important commodity to enable the green transition. Given the ambitious timelines of countries and corporations as well as a shortfall in production growth, copper supply could become insufficient. A deal of this magnitude would not exactly encourage exploration. With regards to the offer our first take is that it appears too low, given that AAL's share price was above GBP 30 last year. Even more, we believe there is a chance that other players will enter the negotiations with a bid over the next weeks, like Vale, Rio Tinto or Glencore. In this case a higher premium would be required.
We reiterate our buy recommendation.
Valuation
Anglo American currently trades at 12.9x P/E 25E, above its 5-year historical average of 8.7x and below the MSCI Europe Materials Index (14.6x). On an EV/EBITDA basis, the stock is trading at 5.3x, above its 5-year average of 4.2x and below the MSCI Europe Materials Index (7.3x).
Financials
Stock and Price Data
GBP 27.0 | GB00B1XZS820 | Materials | GBP 22.05 | No |
Performance
Performance in %
Since inception* | YTD | Last 6 months |
---|---|---|
2.8 | 13.9 | 7.9 |
VP Bank Sustainability Score
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