Anglo American, one of our most beloved South African companies, is up for sale. BHP Billiton made an offer to buy Anglo American, but doesn’t want the South African assets in the form of Anglo Platinum and Kumba Iron Ore, so Anglo American will have to get rid of their stake in those companies before the deal can go through. Anglo Plats has been plagued by suppressed platinum prices and Kumba can’t get its iron ore to the port at Saldanha Bay due to Transnet issues. So BHP wants Anglo’s copper. If BHP should succeed, it would control roughly 10% of world copper supply.
If you are an Anglo American shareholder, you probably saw a handsome spike in the price of your share when the unsolicited offer was made by BHP. It might even get better if a bidding war starts with Rio Tinto and Glencore entering the fray. Anglo’s board has already dismissed the offer because they feel it is too low. The biggest problem for BHP, however, is the approval it has to get from government to go ahead with the deal. Currently it seems like the offer reflects a no-confidence vote in South Africa and Gwede Mantashe has already voiced his disapproval.
At the end of the day it is clear that there are companies in South Africa that offer value and international companies like BHP (Australian), would love to get their hands on them at very reasonable prices. It is also clear that we might end up with a diminishing pool of listed companies on our stock exchange and of predominantly poorer quality. This will inhibit our ability to invest in South African shares with an expectation of receiving a proper return over time.
