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(Sharecast News) - Anglo American surged on Thursday after it received an unsolicited non-binding and highly conditional £31.1bn all-share takeover proposal from Australia's BHP Group - a deal that would create the world's largest miner and copper producer.
The proposal would be preceded by separate demergers of Anglo's entire shareholdings in its platinum business and Kumba Iron Ore to its shareholders. The two parts of the proposal would be inter-conditional.
BHP said that under the terms of the proposal, shareholders would receive a total value of £25.08 per Anglo American share, including £4.86 in Anglo Platinum shares and £3.40 in Kumba shares.
They would also receive 0.7097 BHP shares for each ordinary share in Anglo American they currently own.
The price represents a premium of 31% on the implied market value of Anglo American's unlisted assets.
Anglo said in a separate statement that it was reviewing the proposal with its advisers.
"There can be no certainty that any offer will be made nor as to the terms on which any such offer might be made," it said.
BHP said the combined entity would have a leading portfolio of large, low-cost, long-life Tier 1 assets focused on iron ore and metallurgical coal and future facing commodities, including potash and copper.
"These would be expected to generate significant cash flows and the combined entity would have the financial capacity to support value adding growth projects at the optimal time, while continuing BHP's commitment to shareholder returns," it said.
"The combination would also deliver meaningful synergies, including from sharing best practice, creating procurement, operational and marketing synergies and eliminating duplication, which would enhance profitability and value for Anglo American shareholders."
At 0905 BST, Anglo shares were up 11% at 2,455p.
Neil Wilson, chief market analyst at Finalto, said: "Anglo has not had a great year - the rally this morning has erased the losses of the last 12 months, just. It's got the assets but is not maybe doing as well as it might; in December the company downgraded its production targets.
"BHP clearly wants the copper assets - it's not long after buying Oz Minerals. Clearly, competition authorities would take note due to the position in copper a combined company would have. South African platinum and iron ore assets would be spun off, which could be politically sensitive.
"If BHP doesn't make it work, others may try. Shares trade at £24.80, a little shy of the £25.08 implied by the offer - not much discount, suggesting it's a) being treated seriously and b) could go higher. BHP boss Mike Henry has previously said he will take a disciplined approach to M&A - bulging coffers thanks to bumper profits in recent years may test that resolve. Long term mega trends suggest demand for metals is only going to increase."
Anglo American considering sale of diamond business, according to WSJ
Separately, the Wall Street Journal reported earlier on Thursday that Anglo American was considering selling its diamond business De Beers.
It cited people familiar with the matter as saying that Anglo had had discussions with potential buyers in a separate process from BHP's takeover bid.
The company held conversations in recent weeks with potential buyers, including luxury houses and Gulf sovereign-wealth funds, sources told the WSJ. It was understood that Anglo has signalled to potential suitors that it was open to offers.
