A previous editorial mentioned, quite presciently, that in fending off hostile bids, a target company can sometimes get a much-needed jolt in revamping value-unlocking and growth strategies.
BHP certainly touched a nerve in Anglo American. The proposed restructuring at Anglo is epic in its sweep — and that’s from a group that has been through a few big changes over the decades (the reincorporation of Minorco and De Beers as well as the release of the array of nonmining investments in the late 1990s). The market, though, took the news quite warily. Immediately after Anglo’s value-unlock announcement, shares in rebuffed BHP skittered up, while Anglo edged down more than 4%.
New-look Anglo will offer a huge play on copper, tempered by iron ore and a fledgling crop nutrients hub. Out go steelmaking coal and nickel — the former probably the most significant in terms of possible sales proceeds in the short term. The major stake in Anglo American Platinum will be unbundled, and diamond giant De Beers will be divested or demerged.
The position on De Beers is interesting. It’s certainly not a great time to be marketing a large diamond business — not when the proliferation of synthetic diamonds is throwing a curve ball at the industry’s long-term prospects. Equally, it seems unlikely there would be an enthusiastic response to spinning off De Beers and separately listing it on a major bourse.
Overall, a sizeable reduction in future capital expenditure and a stouter balance sheet are appealing. But are they appealing enough for Anglo’s shareholders to see off any other bids that will undoubtedly materialise in the weeks and months ahead?
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