UK must ght to keep its mining giant
The FTSE 100 is at risk of losing another big name to foreign bidders. The government should step in
It is the kind of mega-deal the City has not seen for years. The Australian-listed resources giant BHP offered £31bn for its UK listed rival, Anglo American. It was a complex offer that involved Anglo demerging assets before being bought out. Anglo has already rejected it, and its rising share price has taken its value to £36bn. It’s clear BHP is not going to succeed with its offer, and that a counter-bidder may well step in, or BHP be forced to pay more.
Who else might bid? Glencore is one obvious rival suitor. Another would be Rio Tinto. Both the mining conglomerates would make obvious merger partners, and they would be reluctant to allow BHP to walk away with such a prize asset without trying to buy it themselves. It could even be a potential acquisition for BP or Shell. After all, they are also in the natural-resources business, and Anglo could help them diversify away from a declining fossil-fuel business – Anglo is a major copper miner, and the metal is vital for the infrastructure needed for the transition to net zero.
Whatever happens, it looks as if there will be a bidding war that will push the final price well above the 2,700p mark at which Anglo is currently trading – a 38% gain since the start of the year. Plenty of UK share portfolios will look a lot healthier by the time the war is over, and it will be enough to push up the FTSE 100 index.
The government is staying out of the battle for now. On one level that is the right decision. The UK does not have “national champions” and Anglo American is as much a South African company as a British one, with deep roots in the former’s mining industry. We have traditionally left it to investors to decide who owns which companies, and if they want to sell out to a different owner that is up to them. The money will probably be invested back in the UK anyway. Interfering with the market ends up doing more harm than good.
This case is different
The trouble is, the London stockmarket is rapidly disappearing. The number of companies listed in the City has fallen by a quarter over the past decade, and was down by another 6% over the last year. Businesses are being bought out, or shifting their listing elsewhere, and very few new ones are floating to take their place. Even Shell has raised the alarming possibility that it might shift its listing to New York.
The London stock exchange is slipping into a vicious circle where fewer and fewer companies are listed, valuations fall because there is very little for investors to put their money into, and that makes the exchange even less attractive. Once that trend gets established it may well prove impossible to break. Within a couple of decades, the London exchange may well be as completely forgotten as the once-thriving Manchester or Liverpool exchanges.
If Anglo is taken over by BHP and Australia remains its sole listing, as seems likely, then yet another major company will have left the London market. We don’t expect another £30bn-plus conglomerate to be floated any time soon. It will accelerate the decline of the exchange and could even prove to be the moment when it becomes terminal. Behind the scenes the government should be trying to stop that happening. True, its power is limited. Anglo American has a global shareholder base, the hedge funds have already piled into the shares, and they will be looking for the company to be sold at the highest possible price.
Still, a little arm twisting from ministers could help a rival domestic offer for the company to emerge. Glencore is a more than credible bidder, and with a market value of £57bn could certainly afford it. So is Rio Tinto, with a value of £180bn. The two British oil giants, BP and Shell, could certainly afford it as well. The BHP bid undervalues Anglo American. That much is already clear from the share price. And an all-UK deal would create a British resources giant and keep the business listed in London. The UK should be doing everything it can to make it happen.