Why the BHP Share Price Plummeting Today?

The BHP Group Ltd (ASX: BHP) share price has taken a noticeable hit following the company's third attempt to acquire Anglo American. Closing at $46.24 yesterday, BHP shares have dropped to $44.96 in morning trade on Thursday, marking a 2.8% decrease. Meanwhile, the broader S&P/ASX 200 Index (ASX: XJO) has also seen a decline, albeit a smaller one of 0.9%.

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BHP's Persistent Pursuit of Anglo American

The drop in BHP's share price comes amidst its ongoing multi-billion dollar takeover bids for Anglo American. BHP has made three offers so far, all of which have been swiftly rejected by Anglo's board. The latest offer, valued at approximately $74 billion, is no exception.

BHP's interest primarily lies in Anglo's copper assets. If successful, this acquisition would position BHP as the world's leading copper producer. BHP has also signaled plans to divest some of Anglo's other assets, including its South African platinum and iron ore projects.

BHP's first takeover bid was launched on April 26. This initial offer was promptly declined by Anglo American, which deemed the bid too complex and undervaluing its assets and future growth potential. This rejection caused an initial drop in BHP's share price.

On May 14, BHP returned with a sweetened offer, this time valued at around $64 billion. However, this second proposal was also turned down by Anglo's board, maintaining their stance on the undervaluation of the company.

BHP's third offer, valued at $59.64 per Anglo American share, represents a significant premium over Anglo's recent share price. Despite this substantial premium, Anglo American's chairman, Stuart Chambers, remains unconvinced of the merger's benefits compared to Anglo's standalone prospects. However, this does not entirely close the door on a potential deal, which could impact ASX mining stocks.

The Road Ahead for BHP and Anglo American

Despite the rejections, there seems to be room for further negotiation. Anglo American has requested a one-week extension to the "put up or shut up" (PUSU) deadline, which has been consented to by the regulatory panel, moving the new deadline to May 29.

BHP's CEO, Mike Henry, remains optimistic about the potential merger, stating, "BHP's revised proposal will offer immediate value for Anglo American shareholders and allow them to benefit from the long-term value generation of the combined group."

Conversely, Anglo American's chairman, Stuart Chambers, asserts the company's confidence in its future as a standalone entity, yet remains open to discussions with BHP. "The board is willing to continue to engage with BHP and its advisers on this topic," Chambers said, indicating a willingness to explore further opportunities for negotiation.

Market experts like James Whiteside, metals and mining corporate research director at Wood Mackenzie, suggest that the ongoing discussions may signal a potential breakthrough. According to Whiteside, "The companies believe that they're getting closer. Anglo has probably signposted what needs to happen to get it over the line."

BHP Share Price Performance

Despite the recent pressures, BHP's share price has demonstrated resilience over the past year, showing a 3% increase. The current fluctuations are largely attributed to the uncertainty surrounding the takeover bids.

Should the takeover succeed, the strategic benefits for BHP are significant. The acquisition would not only make BHP the top copper producer globally but also allow for a more streamlined portfolio by divesting non-core assets. This strategic move aligns with BHP's long-term goals of focusing on high-margin, future-facing commodities.

While the potential rewards of this acquisition are substantial, the risks cannot be overlooked. The rejection of three consecutive offers indicates a challenging negotiation landscape. Moreover, the market's response to these bids has been mixed, reflecting concerns over the valuation and integration of Anglo American's assets.

For BHP shareholders, the ongoing takeover attempts have introduced volatility. However, the long-term prospects of a successful acquisition could result in substantial value creation. The premium offered to Anglo American shareholders signifies BHP's commitment to securing the deal, which could ultimately lead to a stronger, more diversified portfolio for BHP.

The BHP share price's recent underperformance is directly tied to its ambitious takeover bids for Anglo American. While the immediate market reaction has been negative, the potential long-term benefits of the acquisition present a compelling case. As negotiations continue and the new PUSU deadline approaches, all eyes will be on BHP and Anglo American to see if a breakthrough can be achieved.