BHP shares sinks on $60b Anglo American takeover news

Three miners stand together at a mine site studying documents with equipment in the background

BHP Group Ltd (ASX: BHP) shares are under pressure on Friday.

In morning trade, the mining giant’s shares are down 4% to $43.42.

Why are BHP shares falling?

Investors have been selling the Big Australian’s shares this morning after responding negatively to news that it is looking to make a mega acquisition.

According to an announcement, BHP has made a non-binding, all scrip offer to acquire Anglo American (LSE: AAL) for 31.1 billion pounds (~A$60 billion).

If the deal goes ahead, Anglo American shareholders will receive 0.7097 BHP shares for each share they own in the global miner.

As things stand, no decision has been made on the offer. Anglo American commented that its board is currently reviewing the proposal with its advisers.

Why is BHP wanting to acquire Anglo American?

BHP appears to have made the offer largely due to Anglo American’s focus on future facing commodities, and particularly copper.

In fact, the combination of the two companies would create the largest copper miner in the world and be responsible for 10% of global output.

BHP also highlights that the “combined entity would have a leading portfolio of large, low-cost, long-life Tier 1 assets.”

It believes these assets would “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 with all good acquisitions, meaningful synergies are expected to be realised from the deal. This includes “from sharing best practice, creating procurement, operational and marketing synergies and eliminating duplication, which would enhance profitability and value for Anglo American shareholders.”

What’s next?

BHP has warned that there’s no guarantee a deal will be concluded. It said:

This announcement does not amount to a firm intention to make an offer and there can be no certainty that an offer will be made. There is no certainty that any form of agreement or transaction will be reached or concluded.

But the good news is that the matter is not expected to drag on for very long. That’s because the UK share market requires BHP to either announce a firm intention to make an offer for Anglo American or announce that it does not intend to make an offer by no later than 22 May 2024.

Though, judging by the way BHP shares are falling today, it seems that some investors are not overly keen on the Big Australian pushing ahead with its offer.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.