BHP Loses 'The Last Throw Of The Dice,' On Anglo American Acquisition

After a rollercoaster weekend, BHP (NYSE:BHP) has definitely walked away from the last-minute attempt to acquire Anglo American (OTC:AAUKF), weeks before its shareholders vote on a $53 billion merger with Teck Resources (NYSE:TECK).

Despite repeatedly distancing itself from speculations throughout the year, the Australian commodities giant had quietly re-engaged Anglo's management, according to Bloomberg. Reportedly, it was a simplified proposal that avoided the contentious break-up structure that derailed the previous $49 billion bid.

"It's a last throw of the dice for BHP," Andy Forster, portfolio manager at Argo Investments, said, according to Reuters. "I'm a bit surprised that, given the relative performance, they thought they were in a position to come back and do another deal and extract value for shareholders," he added.

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Yet, by Monday, the world's largest miner issued a statement to shut down speculations and definitely close the chapter. BHP noted that, despite strong strategic merits for this transaction, it would remain committed to its organic growth pipeline. 

The Copper Angle

BHP's motivation was clear. Anglo's copper business in South America. These assets in Chile and Peru have earned a reputation as among the best in the industry. With copper demand set to surge through the energy transition and supply growth constrained, Anglo was a perennial takeover target despite its mix of niche businesses.

BHP already holds the title of the world's largest copper producer, but without new large-scale options, it risks ceding that position within the decade.

Anglo's pending merger with Teck would reshape the sector in its own right. The $53 billion deal, proposed in September, would consolidate two major copper pipelines. It would create a company with enough scale to rival the output of the massive Escondida mine in Chile. It would be the second-largest mining deal ever, behind only the Glencore-Xstrata merger from 2013.

BHP's withdrawal might clear the horizon on the shareholder vote, removing the last "what if" from the skeptics. Even so, a decisive shareholder vote on December 9 will not be the final step.

Should investors approve the merger and create "Anglo Teck," the deal must still undergo scrutiny under the Investment Canada Act before it can proceed. For Ottawa, this fact means influence over domestic job commitments and the future headquarters of the combined company.

Price Action: BHP shares were trading lower by 0.62% to $52.75 premarket at last check Monday.

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