Anglo American Rejects $39 Billion BHP Bid, Setting Up Likely Bidding War - Kanebridge News
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Anglo American Rejects $39 Billion BHP Bid, Setting Up Likely Bidding War

U.K.-listed mining giant’s chairman says the proposal undervalues the company

Mon, Apr 29, 2024 10:35amGrey Clock 2 min

LONDON— Anglo American on Friday rejected a $39 billion takeover proposal from rival BHP, saying the bid “significantly undervalues” the company and setting the stage for a potential bidding war.

London-listed Anglo American said the unsolicited proposal, which was made earlier this month and which became public this week, features an unattractive structure that is too uncertain and complex .

Anglo American Chairman Stuart Chambers said the company stands to benefit from its portfolio of assets, including copper, that are likely to experience growth from trends around the energy transition. BHP’s bid, Chambers said, is opportunistic and dilutive for shareholders.

BHP’s all-share offer valued Anglo American at about $38.8 billion, and would have been contingent upon Anglo American spinning off shareholdings in two South African-listed units. The proposal represented a premium of about 31%, not including the South African-listed units, based on Tuesday’s closing prices.

Some analysts had predicted Anglo would find the bid too low and are expecting BHP to return with another. BHP has until May 22 to make a firm offer, though the deadline can be extended. Industry participants expect other large miners to also take a run at Anglo, whose share price has dropped since 2022 as lower commodity prices have ripped through the industry.

A tie-up between BHP and Anglo American, which would be the largest mining deal on record, would illustrate the growing importance of copper, a metal essential to clean-energy products , to a sector that has long relied on Chinese industrialisation to boost profits.

Copper represents some 30% of Anglo American’s output, while BHP counts a majority stake in Chile’s Escondida, the world’s biggest copper mine, among its assets. BHP bought Australian copper-and-gold miner Oz Minerals for $6.34 billion in May last year, representing its biggest acquisition since 2011.

Copper prices are up some 15% so far this year, reflecting expectations that demand for the metal will rise as the world decarbonises and supply will be constrained. Electric vehicles and wind farms use copper in much greater quantities than gasoline-powered cars and coal-fired power stations.

Anglo American has been reviewing its assets in recent months, and has held early conversations with potential buyers for its storied De Beers diamond unit, which it values at more than $7 billion, The Wall Street Journal reported Thursday.

Activist firm Elliott Investment Management holds a stake in Anglo American worth roughly $1 billion, accumulated over several months and before BHP’s move on the miner, according to a person familiar with the matter. The firm is widely known for its campaigns to push companies for change to boost their stock prices. Its view of the Anglo American holding couldn’t be learned.

That said, a jump in Anglo American’s share price following BHP’s takeover offer indicates Elliott has already profited from its holding, potentially reducing any incentive for it to take any action until the outcome of BHP’s bid becomes clearer.

Anglo’s stock on Friday traded above the implied value of BHP’s offer, indicating the market expects a higher bid to emerge.


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These stocks are getting hit for a reason. Instead, focus on stocks that show ‘relative strength.’ Here’s how.

Wed, Jun 12, 2024 4 min

A lot of investors get stock-picking wrong before they even get started: Instead of targeting the top-performing stocks in the market, they focus on the laggards—widely known companies that look as if they are on sale after a period of stock-price weakness.

But these weak performers usually are going down for good reasons, such as for deteriorating sales and earnings, market-share losses or mutual-fund managers who are unwinding positions.

Decades of Investor’s Business Daily research shows these aren’t the stocks that tend to become stock-market leaders. The stocks that reward investors with handsome gains for months or years are more often  already  the strongest price performers, usually because of outstanding earnings and sales growth and increasing fund ownership.

Of course, many investors already chase performance and pour money into winning stocks. So how can a discerning investor find the winning stocks that have more room to run?

Enter “relative strength”—the notion that strength begets more strength. Relative strength measures stocks’ recent performance relative to the overall market. Investing in stocks with high relative strength means going with the winners, rather than picking stocks in hopes of a rebound. Why bet on a last-place team when you can wager on the leader?

One of the easiest ways to identify the strongest price performers is with IBD’s Relative Strength Rating. Ranked on a scale of 1-99, a stock with an RS rating of 99 has outperformed 99% of all stocks based on 12-month price performance.

How to use the metric

To capitalise on relative strength, an investor’s search should be focused on stocks with RS ratings of at least 80.

But beware: While the goal is to buy stocks that are performing better than the overall market, stocks with the highest RS ratings aren’t  always  the best to buy. No doubt, some stocks extend rallies for years. But others will be too far into their price run-up and ready to start a longer-term price decline.

Thus, there is a limit to chasing performance. To avoid this pitfall, investors should focus on stocks that have strong relative strength but have seen a moderate price decline and are just coming out of weeks or months of trading within a limited range. This range will vary by stock, but IBD research shows that most good trading patterns can show declines of up to one-third.

Here, a relative strength line on a chart may be helpful for confirming an RS rating’s buy signal. Offered on some stock-charting tools, including IBD’s, the line is a way to visualise relative strength by comparing a stock’s price performance relative to the movement of the S&P 500 or other benchmark.

When the line is sloping upward, it means the stock is outperforming the benchmark. When it is sloping downward, the stock is lagging behind the benchmark. One reason the RS line is helpful is that the line can rise even when a stock price is falling, meaning its value is falling at a slower pace than the benchmark.

A case study

The value of relative strength could be seen in Google parent Alphabet in January 2020, when its RS rating was 89 before it started a 10-month run when the stock rose 64%. Meta Platforms ’ RS rating was 96 before the Facebook parent hit new highs in March 2023 and ran up 65% in four months. Abercrombie & Fitch , one of 2023’s best-performing stocks, had a 94 rating before it soared 342% in nine months starting in June 2023.

Those stocks weren’t flukes. In a study of the biggest stock-market winners from the early 1950s through 2008, the average RS rating of the best performers before they began their major price runs was 87.

To see relative strength in action, consider Nvidia . The chip stock was an established leader, having shot up 365% from its October 2022 low to its high of $504.48 in late August 2023.

But then it spent the next four months rangebound—giving up some ground, then gaining some back. Through this period, shares held between $392.30 and the August peak, declining no more than 22% from top to bottom.

On Jan. 8, Nvidia broke out of its trading range to new highs. The previous session, Nvidia’s RS rating was 97. And that week, the stock’s relative strength line hit new highs. The catalyst: Investors cheered the company’s update on its latest advancements in artificial intelligence.

Nvidia then rose 16% on Feb. 22 after the company said earnings for the January-ended quarter soared 486% year over year to $5.16 a share. Revenue more than tripled to $22.1 billion. It also significantly raised its earnings and revenue guidance for the quarter that was to end in April. In all, Nvidia climbed 89% from Jan. 5 to its March 7 close.

And the stock has continued to run up, surging past $1,000 a share in late May after the company exceeded that guidance for the April-ended quarter and delivered record revenue of $26 billion and record net profit of $14.88 billion.

Ken Shreve  is a senior markets writer at Investor’s Business Daily. Follow him on X  @IBD_KShreve  for more stock-market analysis and insights, or contact him at .