BHP Group's proposal to Anglo American plc

BHP Group Ltd (ASX: $BHP) has made a proposal to the Board of Directors of Anglo American plc regarding a potential combination to be effected by way of a scheme of arrangement. The 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 Ltd and Kumba Iron Ore Ltd to Anglo American shareholders before completion.

Executive commentary on the proposal

The combination would bring together the strengths of BHP and Anglo American in an optimal structure. Anglo American would bring its assets and long-term growth potential. BHP would bring its higher margin cash generative assets and growth projects along with its larger free cash flows and stronger balance sheet. The combined entity would have a leading portfolio of large, low-cost, long-life Tier 1 assets focused on iron ore and metallurgical coal and future facing commodities, including potash and copper. These would be expected to 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.

Summary of the proposal and outlook

BHP's proposal to Anglo American plc comprises an all-share offer with the distribution of Anglo Platinum and Kumba shares, representing a total value of approximately £25.08 per Anglo American ordinary share. The proposal is non-binding and subject to customary conditions including completion of due diligence to the satisfaction of BHP. The combination is consistent with BHP's strategy including its focus on long term fundamental value and its capital allocation framework. The proposal aims to deliver ongoing value for Anglo American shareholders and is attractive to BHP's shareholders by increasing exposure to future facing commodities, complementing BHP's existing portfolios, providing value adding growth options, and delivering meaningful synergies. The announcement does not amount to a firm intention to make an offer, and there is no certainty that an offer will be made. The deadline for BHP to announce a firm intention to make an offer for Anglo American is 22 May 2024, which can be extended with the consent of the UK Panel on Takeovers and Mergers. BHP reserves the right to vary the form and/or mix of the offer consideration and vary the transaction structure.