“Bid or no bid, it looks as if we’re getting a break-up of Anglo American whatever the outcome,” says Dan Coatsworth, investment analyst at AJ Bell.
“However, there are major consequences if Anglo American demerges or sells certain interests including diamond, platinum and coal assets.
“Doing so would effectively make Anglo American even more attractive to potential bidders as it would have slimmed down and got rid of a lot of the fat that someone like BHP wouldn’t want.
“In essence, it would create a fitter version of Anglo American and a bidder could come along and not have to waste time putting the acquired business on a weight-loss programme. A takeover seems inevitable, whether it’s this year or over the next few years once the break-up has completed.
“Anglo American offers a ready-made portfolio of long-life copper and iron ore assets, which is a much easier way for a rival miner to increase scale in strategically important commodities than drilling thousands of holes in the ground on exploration projects.
“Its third arm will be crop nutrients – attractive to someone like BHP which has big interests in potash, a crop fertiliser, but not necessarily appealing to all major miners on the acquisition trail. It’s possible that a potential suitor may not want to buy that part of the business, meaning any takeover won’t be straightforward – but such is life in the mining sector.
“One of the downsides of Anglo American’s new strategy plan is that a gigantic polyhalite mining project in Yorkshire is being slowed down. Central to its 2020 acquisition of Sirius Minerals, it was hoped that Anglo American would help to revive the UK mining industry in a major way. However, this is a very expensive project and Anglo American wants to get its finances in a better shape which means going at a slower pace with the Woodsmith project.
“The negative market reaction to Anglo American’s new strategy announcement implies that investors aren’t blown away with the plans. Separation could take a long time and some investors might have been hoping for more near-term value generation.”
