Introduction: BHP proposes takeover of Anglo AmericanGood morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
There’s takeover excitement in the mining world this morning after Australia’s BHP made a takeover approach for smaller rival Anglo American
The deal, if completed, would be one of the largest in the sector for years, and create the world’s biggest copper miner.
Anglo confirmed overnight that it had received an “unsolicited, non-binding and highly conditional” all-share buyout proposal from BHP Group, which it is currently examining.
The proposal is conditional on Anglo first splitting off its South African platinum and iron ore units, suggesting BHP is primarily interested in Anglo’s copper resources.
Anglo says:
The Board is currently reviewing this proposal with its advisers. There can be no certainty that any offer will be made nor as to the terms on which any such offer might be made.
Pending any further announcements Anglo American shareholders should take no action. A further announcement will be made as and when appropriate.
Mega commodity deal season is back after many years$AAL $BHP
BHP has proposed a takeover of Anglo American in an all-stock deal that would bring together two global mining companies and rank as one of the industry’s largest transactions in years.
BHP, the world’s ….
— Markets (@NewsoftheMarket) April 25, 2024Anglo had been seen as a potential takeover target since late last year, when it warned that production had been weaker than expected. Shares are down around 10% over the last 12 months.
BHP’s interest in acquiring Anglo raises fresh concerns about an exodus of UK firms from London.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, explains:
‘’The buyout offer from BHP, the world’s largest publicly listed miner, for Anglo American, won’t just shake up the mining industry, but will send a fresh chill through the City of London
There are concerns that if the deal goes through it could be the tip of the iceberg and more giants could leave the exchange. It comes hot on the heels of speculation that Shell might up sticks and leave for New York, rumours that Ocado may be considering leaving for the Big Apple, and follows the crushing disappointment of home-grown chip designer Arm choosing the Nasdaq over the FTSE 100.
The agenda 9am BST: European Central Bank’s economic bulletin
11am BST: CBI’s distributive trades survey of UK retailers
1.30pm BST: US GDP report for Q1 2024
3pm BST: US pending home sales data for March
Key events
The boss of UK supermarket group Sainsbury’s has warned that delays to shipments through the Red Sea have led to “a bit” of disruption to clothing supplies in the last few months.
Simon Roberts also told reporters this morning that food inflation is likely to remain in “low single digits” this year
Roberts was speaking after Sainsbury’s told shareholders it was confident of delivering strong profit growth in the year ahead. It reported a 15% drop in pretax profits for the year to 2 March 2024 this morning, although underlying profits rose 1.6%.
FTSE 100 clears 8100 points for first timeThe London stock market rally continues, with the FTSE 100 hitting a new intraday record high of 8102.14 points this morning.
The 0.7% rally is being driven by Anglo American, and also relief at the strong results from AstraZeneca and Unilever this morning.
The jump in Anglo American’s share price morning, close to BHP’s offer, suggests. there is a reasonably high probability of the proposal succeeding, says Andrew Keen of investment research and consultancy firm Edison Group.
Keen adds, though, that the deal is likely to take some time to play out.
Premiums for successful M&A in large cap mining are often in the order of 30%. Anglo’s announcement indicates that the approach has been made on an all-share basis, but cash components can be used as sweeteners and initial offers are often improved.
Anglo has had a spate of operational issues recently and now needs to argue it is the best owner of its assets. If an alternative bidder emerges, its likely the debate will switch to the value of the competing offers.
The prospect of Anglo American being taken over comes at “crisis time” for the London stock exchange, argues Dan Coatsworth, investment analyst at AJ Bell.
He explains:
“The London stock market is shrinking fast as companies are either taken over, switch listing to the US or delist to get out of the public’s eye.
It’s crisis time for the London Stock Exchange as it fights to preserve the integrity of the UK market.”
BHP’s interest comes at a tricky time for LSE boss David Schwimmer, with shareholders due to vote today on whether his maximum pay packet should be almost doubled.
Although Anglo’s shares have surged 13%, shares in BHP’s London-listed shares are down 2.5% this morning.
BHP was removed from the FTSE 100 in 2021 after deciding to shift its main listing to Sydney, and abandon a dual listing in London.
UK advertising spend drops amid brutal marketJane Croft
UK advertising spend reached £36.6bn in 2023 representing a real term contraction of 1.2% and underscoring the brutal advertising downturn in TV, regional media and magazine advertising, according to a new report.
The UK’s advertising market rose by 6.1% last year, but this equates to a 1.2% contraction in real terms after accounting for high inflation, according to the latest annual Advertising Association/WARC Expenditure analysis.
Advertising is seen as a bellwether of the economic climate and in the past year the sector has been buffeted as corporate clients cut back on spending. This has hit broadcasters such as ITV and Channel 4. Dame Carolyn McCall, chief executive of ITV last year said that the industry was in the “worst advertising recession since the global financial crisis.”
The AA/ WARC report found that TV advertising spend fell almost 9% dropping from £5.3bn in 2022 to £4.9bn last year. Advertising spend in magazine brands was also hit badly falling 9% from £553.8m in 2022 to £503.3m last year and in regional media brands it fell almost 10% from £505.2m in 2022 to £454.2m last year.
The report is more optimistic about 2024 forecasting that advertising spend will rise by 5.8% to reach £38.8bn in 2024.
Advertisers will be investing more in brand-building campaigns in 2024, the report says which will help an advertising recovery along with a number of high profile sporting events such as the Euro football championships in June, and the Paris Olympics in July along with the upcoming UK general election.
James McDonald, director of data, intelligence & forecasting at WARC, said:
“Our latest survey of media owners confirms 2023 as a challenging year for most, with few properties recording gains and spend instead further consolidating within search and online display formats– particularly social media.
“Our forecasts assume that the UK’s economy will begin to break from the pattern of stagnation that has come to define recent quarters. Easing inflation over the coming 18 months should encourage more favourable trading conditions within the advertising sector, facilitating growth across a broader range of channels in turn.”
WSJ: Anglo considers sale of diamond unit De BeersAn emerald-cut diamond single-stone ring by De Beers Photograph: Bonham’s/PAInterestingly, the Wall Street Journal is reporting that Anglo American is considering a sale of its diamond business De Beers.
The WSJ says Anglo has had discussions with potential buyers, in a separate process from BHP’s takeover bid.
It adds:
The London-listed company has held conversations in recent weeks with potential buyers, including luxury houses and Gulf sovereign-wealth funds, the people said. Anglo has signaled to potential suitors that it is open to offers, according to people familiar with the matter.
This plan wouldn’t appear to derail BHP’s ambitions, given it appears to be interested in Anglo’s copper production arm. Forbes are reporting that the De Beers diamond business is “certain to be sold” if the BHP deal goes through.
BHP’s proposal to buy Anglo American is a “monster” deal, says analyst Neil Wilson of Markets.com.
He explains:
Anglo shares jumped 11% at the open. Anglo has not had a great year – the rally this morning has erased the losses of the last 12 months, just. It’s got the assets but is not maybe doing as well as it might; in December the company downgraded its production targets. BHP clearly wants the copper assets – it’s not long after buying Oz Minerals.
Clearly, competition authorities would take note due to the position in copper a combined company would have. South African platinum and iron ore assets would be spun off, which could be politically sensitive. If BHP doesn’t make it work, others may try. Shares trade at £24.80, a little shy of the £25.08 implied by the offer – not much discount, suggesting it’s a) being treated seriously and b) could go higher.
BHP boss Mike Henry has previously said he will take a disciplined approach to M&A – bulging coffers thanks to bumper profits in recent years may test that resolve. Long term mega trends suggest demand for metals is only going to increase.
BHP Group is trying to take advantage of Anglo American’s recent weakness by making its takeover proposal, says Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown:
The biggest headline-grabber today is news that BHP has made a buyout approach for Anglo American. Anglo’s exposure to copper compared to other listed miners is core area of BHP’s focus, as it looks to benefit from the material as the energy transition gathers pace.
At the same time, BHP is looking to make hay while the sun shines on the gold price, but a deal of this magnitude does little to reassure investors it’s prioritising cost targets. BHP is also taking advantage of Anglo’s more recent weakness, which has seen it review its assets and write down their value. Should the deal go ahead, it would interrupt the long-term potential for Anglo investors, at a time when a turnaround is likely.
If the deal happens, it would add to a global flurry of M&A, and also be BHP’s second major acquisition in around a year. The move also suggests we could see further offers coming to the table for some of Anglo’s other assets, as well as for other smaller companies.
FTSE 100 hits another record highBHP Group’s pursuit of Anglo American has driven the UK’s blue-chip share index to a new alltime high.
The FTSE 100 has jumped by 58 points, or 0.7%, to hit 8098.14 points. That’s a new intraday high, for the third day in a row.
Anglo American (+13%) is the top riser on the FTSE 100, but it’s not the only factor pushing stocks higher.
It’s followed by pharmaceuticals group AstraZeneca, (+5.5%) which beat City forecasts for revenuees and profits this morning, including a 26% jump in oncology revenues.
In third place is Unilever (+4%), which has beaten sales forecasts for the first quarter and reported strong sales growth for its Dove, Knorr, Rexona and Sunsilk brands.
Then its Barclays (+3.4%), after reporting a 12% drop in profits which was less severe than expected.
Anglo shares surge in early tradingBoom! Shares in Anglo American have surged by over 10% at the start of trading in London.
They’ve jumped by 13% to £24.96, up from £22.05 last night, as traders react to the news that BHP Group has proposed a £31.1bn takeover for its smaller rival.
As flagged at 7.55am, BHP says its offer values Anglo’s shares at £25.08.
BHP confirms proposal for Anglo, at £31.1bnNewsflash: BHP Group has confirmed that it made a takeover proposal for Anglo American.
In a statement to the City, BHP says it “notes the announcement by Anglo American” overnight, and confirms that it made its proposal just over a week ago, on 16th April.
The proposal value Anglo American’s share capital at £31.1bn, higher than its current market capitalisation of £29bn.
BHP insists the plan would deliver value for Anglo American shareholders.
It says:
The combination would bring together the strengths of BHP and Anglo American in an optimal structure. Anglo American would bring its assets and long-term growth potential. BHP would bring its higher margin cash generative assets and growth projects along with its larger free cash flows and stronger balance sheet.
The combined entity would have a leading portfolio of large, low-cost, long-life Tier 1 assets focused on iron ore and metallurgical coal and future facing commodities, including potash and copper. These would be expected to generate significant cash flows and the combined entity would have the financial capacity to support value adding growth projects at the optimal time, while continuing BHP’s commitment to shareholder returns.
As flagged earlier, the plan involves Anglo spinning off its platinum and iron ore interests first.
Shareholders would receive £4.86 worth of shares in Anglo Platinum, and £3.40 of Kumba Iron Ore, as well as 0.7097 BHP shares for each ordinary share in Anglo American they currently own.
BHP says the deal is worth £25.08 per Anglo American ordinary share, ahead of last night’s closing price of £22.05, and that it offers a 31% premium on the implied market value of Anglo American’s unlisted assets.
BHP Billiton making a play for Anglo American – at this rate there’ll only be about 5 companies left in the UK stock market.
— Chris Beauchamp (@ChrisB_IG) April 25, 2024 Barclays profits drop 12%BHP’s pursuit of Anglo comes on a busy morning for corporate news in London.
Barclays bank has reported a 12% drop in pre-tax profits for the last financial year.
The decline was partly due to lower income from deposits and mortgages, as higher interest rate weigh on business, and weaker income from investment banking.
C. S. Venkatakrishnan, Barclays CEO, says the bank is focused on executing the shake-up plan announced in February (which will cut costs and jobs), adding:
We have now announced the sale of our performing Italian mortgage book and are investing in our higher returning UK consumer businesses, including through the expected completion of the Tesco Bank acquisition in Q424.
IF BHP was to take control of Anglo, the combined company would produce around 10% of global output of copper, Reuters points out.
BHP’s proposal to Anglo could potentially flush out other rival suiters, who are also keen to own its copper mines.
Bloomberg explains:
“If BHP does indeed continue to pursue this deal, we would be surprised if other bidders do not emerge,” analysts from Jefferies LLC led by Christopher Lafemina said in an emailed note.
A bid that values Anglo at $42.6 billion — a 28% premium based on its latest share price — might get a deal “across the finish line,” they said.
Copper hit a two-year high earlier this month, with traders betting that supply will struggle to keep up with demand.
Introduction: BHP proposes takeover of Anglo AmericanGood morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
There’s takeover excitement in the mining world this morning after Australia’s BHP made a takeover approach for smaller rival Anglo American
The deal, if completed, would be one of the largest in the sector for years, and create the world’s biggest copper miner.
Anglo confirmed overnight that it had received an “unsolicited, non-binding and highly conditional” all-share buyout proposal from BHP Group, which it is currently examining.
The proposal is conditional on Anglo first splitting off its South African platinum and iron ore units, suggesting BHP is primarily interested in Anglo’s copper resources.
Anglo says:
The Board is currently reviewing this proposal with its advisers. There can be no certainty that any offer will be made nor as to the terms on which any such offer might be made.
Pending any further announcements Anglo American shareholders should take no action. A further announcement will be made as and when appropriate.
Mega commodity deal season is back after many years$AAL $BHP
BHP has proposed a takeover of Anglo American in an all-stock deal that would bring together two global mining companies and rank as one of the industry’s largest transactions in years.
BHP, the world’s ….
— Markets (@NewsoftheMarket) April 25, 2024Anglo had been seen as a potential takeover target since late last year, when it warned that production had been weaker than expected. Shares are down around 10% over the last 12 months.
BHP’s interest in acquiring Anglo raises fresh concerns about an exodus of UK firms from London.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, explains:
‘’The buyout offer from BHP, the world’s largest publicly listed miner, for Anglo American, won’t just shake up the mining industry, but will send a fresh chill through the City of London
There are concerns that if the deal goes through it could be the tip of the iceberg and more giants could leave the exchange. It comes hot on the heels of speculation that Shell might up sticks and leave for New York, rumours that Ocado may be considering leaving for the Big Apple, and follows the crushing disappointment of home-grown chip designer Arm choosing the Nasdaq over the FTSE 100.
The agenda 9am BST: European Central Bank’s economic bulletin
11am BST: CBI’s distributive trades survey of UK retailers
1.30pm BST: US GDP report for Q1 2024
3pm BST: US pending home sales data for March