Anglo unveils radical portfolio shake-up after rejecting BHP offer

(Sharecast News) - Anglo American has announced a "major new phase" in its strategy as it makes radical changes to its business structure to drive shareholder returns and save costs, including the divestment or spin-off of its steelmaking coal, nickel, platinum and diamond operations. The news came just hours after the company received and rejected a second takeover offer from BHP Group worth £34bn.

Following an asset review which started last year, Anglo said it is now focusing on just three main divisions: copper, premium iron ore and crop nutrients.

The miner said the remaining assets are part of a "100% future-enabling portfolio" , with products that support the energy transition, improve global living standards and food security.

Anglo expects rising demand for copper, which generated $3.2bn in EBITDA for the company last year, as the global economy continues to decarbonise through electrification. Premium iron ore made $4.0bn in EBITDA and is essential for steel industry decarbonisation.

Meanwhile, the Woodsmith polyhalite fertiliser mine, which Anglo says will boost food production and sustainable farming practices, is having capex reduced significantly to slow development while the company deleverages the balance sheet - though the project's long-term value potential still holds.

"We expect that a radically simpler business will deliver sustainable incremental value creation through a step change in operational performance and cost reduction," said chief executive Duncan Wanblad.

The structural changes will result in a significant increase in the EBITDA margin to an estimated 46% from 31% last year, while cutting costs by some $1.7bn and reducing leverage to less than 1.5 times net debt-to-EBITDA.

In terms of portfolio simplification, Steelmaking Coal operations will be divested, with proceeds going towards resetting the balance sheet; the company is exploring options for care and maintenance and divestment in nickel as it takes urgent action to limit the impact of short-term market pressure; platinum will demerged to optimise value; while the De Beers diamond division will be divested or demerged, following significant price falls over the past two years.

"Anglo American's shareholders will see the full undiluted upside from these extensive changes, with the value of our copper and iron ore assets brought to the fore," Wanblad said.

"This next step in the transformation of Anglo American's portfolio is set to accelerate the recognition of value that has been inherent in our business for many years and provide Anglo American's shareholders with undiluted and differentiated participation in the major structural demand trends, while minimising any frictional costs associated with this major portfolio transformation."

On Monday evening, Anglo rejected an offer from BHP that valued it at 2,753p a share, up 15% from an earlier proposal in 26 April. The offer included a condition that would force Anglo to demerge entire shareholdings of Anglo American Platinum and Kumba Iron Ore.

"Aside from significantly undervaluing Anglo American, the latest proposal continues to contemplate a structure which the board believes is highly unattractive for Anglo American's shareholders, given the uncertainty and complexity inherent, and significant execution risks," Anglo said in a separate statement.