Anglo American share price rallied by as much as 15.5% to R593.55 per share in afternoon trade on the JSE yesterday following the announcement by the company that it had received an unsolicited and conditional share acquisition offer from its bigger rival, BHP.
BHPs daring $39 billion (R741bn) offer to acquire its smaller rival under an all-share buyout scheme is expected to shake up the global mining industry, create a large mining firm with heavy tentacles over world production of copper.
In London, BHPs proposed acquisition of Anglo American drove up the FTSE 100 index to a new all time high of 8 102.14 points for a third session running, the AFP agency reported.
Anglo has not had a great year the rally (yesterday) morning has erased the losses of the last 12 months, said Neil Wilson, chief market analyst at Finalto.
BHPs stock on the JSE, however, had slithered by 3.54% to R545.50 on the same bourse by lunchtime after it confirmed that it was bidding for Anglo American, minus its platinum group metals (PGMs) and iron ore assets held under Kumba Iron Ore.
BHP CEO Mike Henry has previously said he would take a disciplined approach to mergers and acquisitions.
Wilson said the groups bulging coffers, thanks to bumper profits in recent years, might test the BHP boss resolve.
Long-term mega trends suggest demand for metals is only going to increase, said Wilson.
Apart from Kumba and Anglo American Platinum, Anglo American, which is led by CEO Duncan Wanblad, has copper, diamond, nickel and steel-making coal operations across the world.
BHP confirmed yesterday that it had made an all-share buyout offer of Anglo American, excluding Kumba and Amplats which would have to be spun-off, for $38.9bn at a premium of 31% to the implied market value of the target companys unlisted assets.
BHP's proposal comprises an all-share offer for Anglo American subject to the pro-rata distribution by Anglo American of its entire shareholdings in Anglo American Platinum and Kumba Iron Ore Ltd to Anglo American shareholders before completion, BHP said.
It touted the proposed offer as providing Anglo American shareholders with the benefits of directly retaining their interests in Anglo American Platinum and Kumba.
Moreover, the Anglo American shareholders would be accorded ability to calibrate their relative exposures and determine their optimal shareholding levels in Amplats and Kumba.
Anglo American said its board was currently reviewing this proposal with its advisers that reportedly include Morgan Stanley, Goldman Sachs and Centerview.
The Public Investment Corporation, which holds a big chunk of shares in Anglo Platinum, said yesterday that it would weigh offers presented by the company, the Financial Times reported.
The mining sector remains a critical part of the South African economy, impacting a wide variety of stakeholders, therefore, new opportunities that may arise in the sector need to take these factors and long-term sustainability into account, the PIC was quoted saying.
There were concerns yesterday that BHPs offer will result in the de-listing of Anglo American from London and from Johannesburg.
Anglo American was also reportedly weighing up its options for the disposal of its diamond producing entity, De Beers, which is being affected by low gem prices.
It has also said that it is cutting costs and capital from its PGMs operations, especially in South Africa, as prices of the precious metal remain subdued amid concerns over the groups plans to retrench mineworkers.
