BHP’s bid to take over Anglo American for $49 billion collapsed after weeks of negotiations on Wednesday. The bid was the largest in the commodity sector’s recent history.

Anglo declined to extend the 29 May deadline to allow BHP more time to make a further offer, after having already extended the deadline from a week earlier.

Had the proposed deal been successful, BHP would have accounted for around10% of global mined copper supplyand overtaken Chile’s Codelco as the world’s largest copper miner, according toBenchmark’s Copper Forecast Service.

“Too small a time window to finalise a deal of this size and complexity, failure to win over Anglo’s investors, resistance from Anglo’s board and suboptimal timing of the approach are all reasons behind the failure,” Piotr Ortonowski, a project manager at Benchmark, said. “But, ultimately, it was BHP’s price discipline which determined that enough is enough.”

In 2023, BHP produced around 1.3 million tonnes of copper whilst Anglo produced around 570,000 tonnes. The companies also have significant nickel operations with over 81,00 tonnes and 61,000 tonnes of refined nickel production respectively in 2023, according to Benchmark’s Nickel Forecast.

BHP's proposed merger with Anglo American would create copper giant and bolster nickel exposure

A key sticking point was BHP’s requirement that Anglo entirely demerge its shareholdings in both Anglo American Platinum and Kumba Iron Ore Limited, both of which operate in South Africa.

“The requirement to pursue two contemporaneous demergers of publicly listed companies alongside a takeover and the inter-conditional nature of the three transactions is unprecedented,” Anglo said in a press statement.

“The process of dealing with South African authorities to get the demerger done would likely be very convoluted, drawn out and costly,” Ortonowski said, adding, “Moreover, Anglo’s existing shareholders would be left with separate shares for these demerged assets, which could perform very poorly going forward – a major risk to them.”

What could the impact on the copper market be?

The outlook for the copper market balance is one of undersupply, a view reinforced by BHP’s attempt to take over Anglo. This year isespecially tough for copper miners, with close to a million tonnes of annualised disruptions in only the first five months of the year.

Ortonowski explains that the major players in the industry have been too slow responding to this to organically increase the output of their own projects.

“They are turning to acquisitions as a band-aid to building exposure to copper,” he said.

Recent mine disruptions have removed around 1Mt of mine supply from this year's balance

BHP’s attempt on Anglo is the second major copper-focused merger and acquisition (M&A) approach that has failed in recent years: Glencore’s $23 billion bid for Teck Resources was rejected in 2023.

“Will these failures ramp up pressure on majors to put more effort into expanding copper output through organic growth? Or will they become prepared to pay a higher price for M&A targets?” asks Ortonowski.

On the copper concentrate side, had the deal gone through BHP would have controlled around 15% of global custom copper concentrate supply, according to Benchmark.

How has it impacted copper prices?

Within a week of BHP putting a bid in for Anglo, copper prices on the London Metal Exchange (LME) surged by $400 per tonne and have consolidated above $10,000 per tonne.

“BHP’s approach for Anglo has undeniably been one of the key driving forces behind copper’s recent rally,” Ortonowski said.

Can BHP bid again?

If BHP wants to place another offer, it must wait at least six months before doing so. Though technically, it could bypass the Anglo board and place a hostile bid, but the company has indicated it does not intend to do so.

“With BHP out of the picture in the foreseeable future, Glencore and Rio Tinto have been widely touted as potential suitors,” according to Ortonowski. “Notably, Glencore already co-owns Anglo’s crown jewel – the Collahuasi mine – so is intimately familiar with the asset.”

What’s next for Anglo American?

Not long after the initial bid by BHP, Anglo’s board announced a series of changes to the structure of the business including:

“Celebrations in Anglo’s boardroom are likely to be short-lived – the company’s leadership now faces a much tougher challenge of proving that it can deliver value to its shareholders by following through on a successful restructuring of the business,” Ortonowski said. “Pressure’s on.”

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