BHP’s second offer for Anglo American is still about $8.1 billion short, according to RBC Capital Markets

Adrian Rauso
The Nightly
BHP's Newman mining operation. BHP
BHP's Newman mining operation. BHP Credit: BHP/TheWest

An analyst that correctly predicted BHP’s sweetened takeover offer would be rejected by Anglo American says the Big Australian needs to put a price tag of more than $72 billion on the English miner for a deal to go ahead.

On Monday night Anglo American rejected a scrip deal valuing it at £27.53 a share, or $64.4b, an increase of about $4.8b from BHP’s £25.08 a share proposal last month.

Like the initial offer, BHP would effectively be paying $10.5b less than Anglo’s total value because it wants the takeover target to divest its South African platinum and iron ore units.

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RBC Capital Markets analyst Kaan Peker on Monday morning told clients its UK team crunched the numbers and believe Anglo’s takeover value is £31 a share, equating to about $72.5b.

“This is in-line with recent (Anglo) shareholder feedback advocating an offer above £30/share to proceed,” he said.

“We estimate $US11b ($16.7b) of synergies would be required to justify an offer above £30/share based on our undisturbed Anglo valuation.

“We conservatively estimate $4-6.8b of synergies from the proposed transaction.”

Mr Peker said a narrative of undervalued long-term copper growth and higher long-term copper price could be used by BHP to justify the anticipated gap in synergies.

“However this raises significant project execution (risk) ... and commodity pricing risk”.

Anglo’s shares closed 2.4 per cent lower at £27.07 in London overnight Monday, below the £27.53 that BHP is offering, in an indication investors don’t currently see the deal going ahead and aren’t banking on a better bid coming along.

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