An electrified world has become increasingly dependent on battery metals, particularly on copper, and BHP is, not surprisingly, eager to secure a leading position in this market. A tie-up would give the mining giant about 10% of global copper production.
It would also boost its presence in the world’s top copper producing countries, Chile and Peru, as with the acquisition of Anglo American, BHP would gain access to four of the world’s largest copper mines — Collahuasi (with ownership of 44%), Los Bronces (50.1%), El Soldado (50.1%) and Quellaveco (60%). This would improve the company’s exposure to copper by about 40%.
BHP’s proposal is valued at £25.08 per Anglo share, a 14% premium to the target company’s closing price on Wednesday. According to analysts, the offer is not as sweet as it seems and they believe Anglo American is well-positioned to push for a better deal.
Given its conglomerate nature, finding a knockout price isn’t a simple task.
“Anglo American is an established conglomerate with a complex structure, featuring numerous partial ownership stakes and various defensive mechanisms, most of which are concentrated in its South African assets,” Jefferies’ Christopher LaFemina wrote in a note to clients.
The analyst believes that “a price of at least £28 per share would be necessary for serious discussions to take place, and a takeout price of well above £30 per share would be the outcome if other bidders were to get involved”.
“If we include our estimate of synergies on an after-tax present value basis, we estimate Anglo fair value to be 2824p per share, which equates to a $42.6 billion equity value. That is 28% above the most recent Anglo share price, and we believe it is a reasonable starting point,” LaFemina wrote.
Anglo American became a takeover target in recent years after output fell and costs mounted.
“It became a potential target for BHP as Anglo continued to post a weak top-line, even as its total debt kept increasing since 2021 as a result of the poor performance of platinum group metals (PGMs) and diamonds due to price fluctuations, geopolitical and economic situations, and other operational constraints,” Sathiya Narayanan Jalapathy, Business Fundamentals Analyst at GlobalData, wrote in an emailed statement.
“Amidst this, the company has reported growth of 31.5% in copper sales from $5,599 million in 2022 to $7,360 million in 2023 (…) Operationally, the combined entity could have a top line of over $84 billion, EBITDA of over $34 billion, and a workforce of close to 100,000, reinforcing its position as one the largest global players in the mining sector,” he noted.
“The deal would represent the biggest shakeup of the global mining industry in more than a decade,” says James Whiteside, metals and mining research director at Wood Mackenzie. “But Anglo American shareholders may consider fair value closer to the share price in 2023 before operational issues emerged and other suitors may be compelled to act at this price.”
Loading hauled ore from the mine into the primary crusher at Kumba Iron Ore’s Kolomela. (Image courtesy of Anglo American | Flickr.)
Berenberg analyst Richard Hatch is not convinced that Anglo presents significant turnaround opportunities.
“BHP is potentially buying a group of assets that need some care and attention,” Hatch wrote, referring to Anglo’s operations in South Africa. “This, in our view, offers limited upside at this point with current valuation multiples that would also imply a slightly dilutive deal for BHP.”
According to Fitch Group, BHP is “likely drawn by the company’s low valuation (stock down 12% over the LTM), with the company going through a multi-year operational restructuring. From a strategic standpoint, bigger is always better in the metals and mining sector.”
“Highly opportunistic“
Earlier on Thursday one of Anglo’s 20 largest shareholders, Legal & General Investment Management, said BHP’s approach was “highly opportunistic” and “unattractive”.
“As with many other UK-listed companies, we believe the valuation of Anglo American to be depressed and regard the proposed exchange ratio as an unattractive proposition for long-term investors,” Nick Stansbury, head of climate solutions at Legal & General Investment Management (LGIM), said in an emailed statement.
“The industry is extremely concentrated today, and further consolidating it will not contribute to accelerating investment in the way we believe is needed,” Stansbury said.
Anglo American did not respond to a request for comments but in a statement it said it was reviewing the proposal, which would require it to separate its majority holdings in South Africa of Anglo American Platinum (JSE: AMS) and Kumba Iron Ore (JSE: KIO) beforehand.
With a focus on the metal key to the energy transition, BHP itself bought copper producer OZ Minerals last year for about $6.4 billion while Rio Tinto (NYSE: RIO; LSE: RIO; ASX: RIO), the world’s second largest miner, has been investing in copper mines in Utah and Arizona.
Deal under the microscope
BMO Capital analyst Alexander Pearce highlighted that the deal to combine both miners would be subject to significant anti-trust/competition scrutiny, particularly when it comes to the copper assets.
The Anglo-owned Quellaveco and BHP-owned Antamina mines are key to Peru’s economy. If the merger is successful, both operations would be under the same ownership, raising questions of a potential market concentration issue or even a major political concern.
The deal could face government and local opposition due to the scale and influence of the combined company. Depending on the nature of the perceived problem, the antitrust solution may involve selectively selling off parts of the business that are deemed non-essential, in order to address concentration issues, while preserving the core copper assets that both companies view as strategically important. These are the issues in South America.
The issues the merged company could face in South Africa are equally or more difficult. The nation’s minerals resources minister Gwede Mantashe is not a big fan of BHP and has already voiced his opposition to BHP’s bid for Anglo.
Mantashe told the Financial Times that he was not in favour of BHP’s bid given the country’s previous “not positive” experience with the company, referencing the 2001 merger between BHP and Billiton that created the world’s largest mining company.
While he clarified this was his personal opinion and not the government official position on the matter, Mantashe said that BHP Billiton “never did much for South Africa” and led to “capital leaving the country.”
Anglo American, in contrast, embodies the mining tradition of South Africa. Started in the country in 1917, it holds the fourth-largest position in the FTSE/JSE Africa All Share Index, accounting for 4.3% of the index.
Anglo has controlling interests in two other mining companies listed on the South African stock exchange — Anglo American Platinum Ltd., also known as Amplats, and Kumba Iron Ore.
The company also owns another South African emblematic company: Diamond giant De Beers, which Anglo acquired more than a decade ago.
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
