The collapse of takeover talks for Anglo American, with the British firm rejecting an offer from Australian multinational rival BHP Group, while welcomed by one of its shareholders, could mark the beginning of a period of volatility for the firm's investors.
Anglo American on May 29 rejected the latest offer made by BHP for its firm, following "extensive engagement with BHP and its advisers, with a particular focus on the proposed structure and associated execution and value risks for Anglo American's shareholders," a regulatory filing by Anglo American said. The offer was the third made by BHP.
The decision to reject further takeover talks was welcomed by Adam Matthews, chief responsible investment officer at the £3.3 billion ($4.2 billion) Church of England Pensions Board, London, said the proposed merger had been "unfavorable to the long-term interests of our pension fund members."
The pension fund holds less than £1 million in Anglo American shares, according to Bloomberg.
In a statement made on his official LinkedIn account, Matthews said: “We believe a strongly backed Anglo is better for the mining sector in general, the global (climate) transition and remaining a strong presence in South Africa as well as listed in London.
“In turn we need to recognise that investors are not properly valuing this sector and in particular those companies developing the most socially responsible approaches. There are deep issues that continue to challenge mining and we need a more holistic response as responsible investors.”
Matthews is also chair of the Global Investor Commission on Mining 2030, an investor initiative that aims to develop consensus among investors regarding the role of finance in creating a socially and environmentally responsible mining sector by 2030. The pension fund is also a signatory to the Global Industry Standard on Tailings Management, formed in the aftermath of the 2019 Brumadinho dam disaster, in which a tailings dam at an iron ore mine managed by the firm Vale collapsed in Brazil, killing 270 people.
The pension fund on May 13 had said any takeover of Anglo American posed long-term risks. "Anglo is a globally significant diversified mining company that operates in key parts of the world, particularly in some important emerging and developing markets, and seeks to do so to the highest standards," a statement on its website said. "Losing Anglo as a distinct entity may serve short-term financial interests, but as an asset owner, we are not convinced that such consolidation will serve our long-term interests as a pension fund."
The rejection "leaves Anglo shareholders in the arms of current management and its ambitious plan to turn the business around," said Matt Britzman, equity analyst at financial services firm Hargreaves Lansdown, in an email to Pensions & Investments, referring to an earlier announcement by Anglo American that it would accelerate plans to unlock value and divest from certain businesses, including steelmaking coal and its diamond company De Beers. "The new strategy has a good chance of unlocking value, and the proposition of a more streamlined Anglo focused on copper and iron ore is attractive. But executing such a huge reshuffle brings a host of risks and is expected to take a couple of years to complete,” he added. "The near term has become quite tricky to map and investors should prepare for volatility."
