Anglo American shares soar on £31bn takeover approach from BHP

FTSE 100 mining group Anglo American has seen shares surge higher after receiving a £31.1 billion takeover approach from rival BHP Billiton in a potential mining mega-deal.

UK-headquartered Anglo America’s shares shot up by as much as 14% in morning trading on Thursday after revealing overnight that Australia’s BHP – the world’s biggest miner – had put forward the “unsolicited” and “highly conditional” takeover proposal.

Anglo said its board was reviewing the approach with its advisers.

If it goes ahead, the deal would be another blow to the London stock market, with the loss of Anglo American from the top tier of shares and another FTSE 100 mainstay.

Under the potential deal, BHP said it would offer £25.08 a share, including £4.86 a share in Anglo Platinum stock and £3.40 in Kumba Iron Ore company shares.

The takeover would create the world’s biggest copper miner, with around 10% of global output.

It would boost BHP’s presence in the burgeoning copper market, which is seeing demand soar amid the shift towards clean energy, as well as giving it greater access to potash, and coking coal in Australia.

A tie-up between the pair would be one of the biggest deals in the sector in recent years – since the Glencore buyout of Xstrata in 2013.

Anglo said that under the deal being proposed by BHP, it would have to spin off two Anglo units – its platinum arm Anglo American Platinum and Kumba Iron Ore, which are both listed in South Africa.

BHP added that following any deal, Anglo’s other “high quality operations, including its diamond business” would be subject to a strategic review.

BHP said: “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.

“Anglo American has a deep pool of talented people who would continue to make a valuable contribution to the successful operation of Anglo American’s assets within the combined group.”

AJ Bell said the London market was “shrinking fast”, with the possible mining deal marking the second FTSE takeover approach this year, after packaging group DS Smith agreed to a buyout by a US rival.

Dan Coatsworth, investment analyst at AJ Bell, said: “It’s crisis time for the London Stock Exchange as it fights to preserve the integrity of the UK market.”

Neil Wilson, chief market analyst at Finalto, added it comes after heavy share falls for Anglo.

“Anglo has not had a great year – the rally this morning has erased the losses of the last 12 months, just,” he said.

“Clearly, competition authorities would take note due to the position in copper a combined company would have.

“If BHP doesn’t make it work, others may try.”