BHP (ASX:BHP) and Anglo American have yet to agree on terms for their £39bn mining megamerger, raising the stakes as the deadline for negotiations looms on Wednesday.
Anglo American rejected BHP's "final offer" last week but granted a seven-day extension for further talks following pressure from major shareholders, including BlackRock.
Despite this extension prompting the first significant discussions since BHP's initial approach in early April, fundamental disagreements on the deal structure persist after six days of negotiations, according to insiders.
The main sticking point is the sequencing of the takeover, which requires Anglo to spin off its stakes in its South African platinum and iron ore units before BHP can complete its takeover. This makes a deal by the 5pm London deadline on Wednesday unlikely.
Under UK takeover rules, Anglo could grant another extension, but its board is unlikely to do so without a clear path forward, one insider noted.
BHP CEO Mike Henry has been meeting with investors in London since Monday, aiming to pressure Anglo into extending the talks again. Large asset managers like BlackRock hold shares in both companies.
The disagreement centers on the execution risks of demerging Johannesburg-listed Anglo American Platinum and Kumba Iron Ore before BHP completes its takeover of London-listed Anglo. Anglo argues that this condition could lead to "change of control" obligations from the South African government, such as employee ownership requirements or restrictions on job cuts, which could negatively impact share prices and penalize investors.
Anglo had expected BHP to propose solutions during the extension, such as buying the entire company and demerging the units later. However, BHP has remained firm on not improving the share offer or altering the deal structure.
“Unless BHP is willing to compromise on the structure, I don’t see how Anglo’s board can recommend this offer,” said a person close to Anglo American.
BHP contends that Anglo is overstating the execution risks to defend its position and has avoided detailed discussions on potential mitigations.
“What’s interesting here is Anglo hasn’t said there is a fatal flaw to this transaction,” said a person close to BHP, noting that similar transactions have precedents and regulatory clarity.
Both companies declined to comment.
The Wednesday deadline, chosen by Anglo, coincides with South Africa’s national election, adding political complexity. The election is expected to be the most contested since 1994, with recent opposition to the deal from politicians, including mining minister Gwede Mantashe. Behind-closed-doors meetings between company executives and government leaders have tempered some criticism, but Mantashe declined to comment on Monday.
