BHP must get over Anglo, focus on growth projects, investors say

By Melanie Burton and Scott Murdoch

MELBOURNE (Reuters) -BHP should move on from Anglo American and focus on its growth strategy, investors said on Monday, after the Australian company's last-minute appeal to the London-listed firm that is nearing a $60 billion tie-up with Canada's Teck Resources.

The world's largest miner reached out to Anglo's board in recent days to see if there was interest in a deal, Reuters reported on Sunday. But by Monday, BHP said it would no longer pursue a bid and instead focus on its own growth.

Its decision to walk away comes ahead of votes by Teck and Anglo shareholders - set for December 9 - to create Anglo Teck, a copper giant with major development projects in Chile and Peru.

BHP's move suggests it is trying hard to shore up its pipeline of copper, which is expected to underpin the energy transition, following three failed Anglo buyout attempts last year, said investors who were cautious about top-of-the-cycle acquisitions.

"I think that many BHP shareholders would be shocked to hear that BHP was still sniffing around Anglo," said Hugh Dive at Atlas Funds Management in Sydney, which owns BHP shares.

BHP's major growth projects, from its potash production in Canada to its copper expansions in South America, will keep CEO Mike Henry's hands full and buying Anglo would bring new complications to solve, he added.

In July, BHP flagged a delay and cost overrun at its Jansen Potash Project, which is expected to come on line in 2027. It is also forging ahead with three options for growth in copper in Argentina, Chile and Australia.

"M&A is never off the table, as long as it adds value, but you have to argue that with existing shareholders there is a fine line to tread," said Jason Teh, chief investment officer of Vertium Asset Management in Sydney.

"The question is whether the other party is going to come to the table. If they are going to fight tooth-and-nail, then the acquirer ... risks paying over the odds."

The company should instead refine its operations and cut costs as it grows its existing businesses, as opposed to increasing business complexity, said Stephen Butel, portfolio manager at Platypus Asset Management, which sold its BHP holdings last year.

"We believe organic growth is materially more value accretive to shareholders when compared to large-scale M&A such as the Anglo deal," he said.

In the past year, BHP has spent $2 billion for a stake, in partnership with Canada's Lundin, in two Argentinian copper projects and pushed hard to eke out production gains at Escondida, a copper mine in Chile.

It is also preparing to make an investment decision by mid-2027 on whether it will double its South Australian output by the middle of next decade.

Joseph Koh at Blackwattle Investment Partners in Sydney, which has holdings in BHP and Anglo, said he was "somewhat relieved" that BHP appeared to be showing capital discipline, although details on the offer have not been made public.

"We don't think BHP are making a crazy move in the approach because Anglo is a high-quality copper producer and we are quite constructive on the outlook for copper," he said. "But for BHP, it's probably time to move on."

(Reporting by Melanie Burton; Editing by Thomas Derpinghaus)