By Melanie Burton
MELBOURNE (Reuters) -Top global miner BHP’s focus on expanding its own copper assets while it undergoes leadership change means it is unlikely to gatecrash the planned $53 billion tie-up of Anglo American and Teck Resources, investors and bankers said on Wednesday.
London-listed Anglo American and Canada’s Teck Resources announced a merger on Tuesday, marking the sector’s second-biggest tie-up ever, to forge a new global copper-focused heavyweight.
The deal came just over a year after BHP scrapped a $49 billion bid for Anglo that in one mega acquisition would have beefed up the Australian miner’s holding in the metal seen as essential to the energy transition.
After being rebuffed by Anglo three times, BHP opted instead to double down on a series of smaller projects where it sees better value, a strategy that investors said has been consistent and suggests it is unlikely to make a move on Anglo or Teck.
“Given BHP’s message, ‘We have moved on,’ any move by BHP for either of the companies would come as a surprise,” said Andy Forster, a portfolio manager at Argo Investments in Sydney, which holds BHP shares.
In the past year, BHP instead spent $2 billion for a stake with Canada’s Lundin in two Argentinian copper projects, including the Josemaria mine whose life was last month extended by six years. It has also pushed hard to eke out production gains at top copper mine Escondida in Chile.
BHP declined to comment on whether it might spoil the Anglo-Teck deal but pointed Reuters to recent comments by its chief executive saying that M&A was just one lever of many for growth.
“Frankly in current markets, it’s hard to see the right combination of the commodities that we like, the asset quality that we like, at a price where we can still unlock attractive value for BHP shareholders,” CEO Mike Henry said on a results call in August.
Despite its recent failure to offload its Australian coal assets, Anglo has worked hard to improve its share price from a year ago, one M&A banker said.
“Both miners are in play now. Anglo’s share price is up, they could probably put in a good defence like they did last time,” he said. Shares in Anglo have jumped 20% since before BHP’s bid in late April while BHP shares have dropped 8%.
The deal was smart in that several factors were favourable to Canada in a way that would be difficult to replicate for other majors who might want to buy Teck, such as relocating the new company’s headquarters to Canada, two people said.
Among the conditions for approving BHP’s merger with South Africa’s Billiton in 2001, the Australian government mandated that the holding company be headquartered in Australia.
Succession may be another stumbling block. BHP Chair Ross McEwan replaced Ken MacKenzie in March, after the latter’s decade at the wheel, while CEO Henry is more than five years into a typical six-year term, meaning that BHP may be focused for now on replacing him rather than on big ticket M&A.
But bankers aren’t ruling out the possibility of BHP swooping in down the track, especially if the deal doesn’t go to plan.
“You’d have to have a serious think about it – the two most obvious targets in a nil premium deal,” said an M&A banker not directly involved in the deal, which the parties expect to take 12 to 18 months to complete.
“They have got time … A deal doesn’t have to be done tomorrow.”
(Reporting by Melanie Burton; Editing by Sonali Paul)
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