By Melanie Burton
MELBOURNE (Reuters) -BHP Group on Wednesday said it needed more time to engage with Anglo American, a week after the London-listed miner rejected BHP’s 38.6 billion pounds ($49.20 billion) takeover bid ahead of a final deadline later in the global day.
In a statement to Australia’s securities exchange, BHP said that it was ready to offer a break fee to Anglo American if the deal was blocked due to anti-trust reasons or if it failed to gain regulatory approval, saying it was sure it had quantified and managed such risk.
It also made socio-economic commitments to South Africa that include sharing costs related to increased employee ownership of the listed business in the country, as well as maintaining current employment levels at Anglo’s Johannesburg office.
“Today’s announcement says to me that BHP are doing all they can to placate any concerns Anglo’s board could have from a South Africa jobs, and regulatory point of view,” said analyst Hayden Bairstow of broker Argonaut in Perth.
“This is them saying, ‘Can we just extend this for another week, and lock it all up?’ and I think that is what will happen.”
Anglo last week granted the world’s biggest listed miner a seven-day extension until 1600 GMT on Wednesday to its original May 22 deadline to submit a binding offer, after rejecting a third takeover proposal it deemed too difficult to execute.
Anglo had no immediate comment when contacted by Reuters.
If Anglo does not agree to an extension to give the BHP more time to work on a binding offer, the Australian-listed miner will have to walk away or wait six months to make another approach – unless a rival bidder emerges – once the deadline expires.
BHP’s share price closed flat on Wednesday at A$45.08 a share.
The last-minute bid comes as BHP had struggled to find common ground with Anglo by Tuesday, five sources told Reuters, with no new concessions granted.
BHP CEO Mike Henry has stood firm on the structure and value of its latest takeover proposal, focusing instead on allaying concerns around execution risk.
That risk includes Black empowerment provisions in South Africa that include local ownership stakes and assurances around employment security for workers in a nation with a jobless rate of over 30%, making it a key election issue.
Wednesday is a public holiday in South Africa due to a general election.
There was also contention around whether there are sufficient buyers for BHP’s 69.7% stake in Kumba Iron Ore and 78.6% stake in platinum miner Amplats, said an investor who declined to be identified as the subject was sensitive.
JPMorgan estimated that capital outflows from South Africa could be around $4.5 billion once those assets are unbundled under the proposed buyout structure.
Initial impressions from BHP investors were that it was more important for the miner to maintain capital discipline, so that a failed takeover attempt would not tarnish Henry’s reputation.
“I would be happy for BHP to walk away if negotiations can’t progress in a good-faith manner; as much as I’d love to see the merger proceed, I think some discipline here is warranted,” said Wilson Asset Management lead portfolio manager Matthew Haupt, a BHP shareholder.
“I think BHP have acted in good faith and put forward a solid proposal and now it’s up to Anglo to engage and get a deal done.”
($1 = 0.7845 pounds)
(Reporting by Melanie Burton in Melbourne and Scott Murdoch in Sydney; Additional reporting by Felix Njini in Johannesburg, Clara Denina in London and Sameer Manekar in Bengaluru; Editing by Subhranshu Sahu and Christopher Cushing)
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