No-moat Anglo (XLON: AAL) has again rejected no-moat BHP’s (ASX: BHP) overtures despite a sweetened all-share proposal via a scheme of arrangement. BHP’s latest proposal has Anglo shareholders receiving 0.8860 BHP shares for each Anglo share held, around 9% higher than the previous proposal and about 25% higher than the original proposal.


While again rejecting BHP, Anglo has successfully requested a one-week extension to the deadline under the United Kingdom's takeover and mergers code. BHP will have until May 29, 2024 to either announce a firm intention to make an offer or walk away. The suitor has maintained the other conditions of the proposal, including Anglo American first demerging and distributing its 78.6% shareholding in Anglo American Platinum, or Amplats, its platinum group metals business, and 69.7% shareholding in Kumba Iron Ore to its shareholders.

We think the deadline extension and upped bid increase the chance of a deal being done to roughly 60% from around 50%. This assumes a 40% chance that a transaction will be done at the current share ratio and a 20% chance that BHP will raise its proposal by another 5% to clinch the deal.

We adjust our fair value estimates for BHP and Anglo accordingly. BHP’s fair value is modestly lowered by 1% to $39.50 per share, while Anglo’s is increased to GBX 2,300 per share from GBX 2,250, with BHP’s higher proposal partially offset by strength in the British pound. We think BHP is overpaying, but its proposal is only modestly dilutive to shareholders. If the transaction fails, we’d likely revert to our prior stand-alone fair value estimates for BHP and Anglo of $40.50 and GBX 2,080 per share, respectively.