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(Bloomberg) — The world’s largest mining company, BHP Group Ltd., has made a takeover approach for rival Anglo American Plc, a move that could spark the biggest shakeup in the industry in over a decade.

Anglo American, which has a market value of £27 billion ($34 billion), said late Wednesday that it had received an unsolicited all-share merger proposal, after Bloomberg reported that BHP was considering a potential offer. It added BHP’s move was conditional on Anglo first splitting off its South African platinum and iron ore units.

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If successful, the transaction would mark a return to large-scale dealmaking for BHP, which has revived its appetite for transformational acquisitions in the past couple of years under Chief Executive Officer Mike Henry. A tie-up with Anglo would create the world’s biggest copper miner ahead of wave of demand from new-energy sectors, and BHP’s move could flush out other suitors aiming to boost their output.

“If BHP does indeed continue to pursue this deal, we would be surprised if other bidders do not emerge,”  analysts from Jefferies LLC led by Christopher LaFemina said in an emailed note. A bid that values Anglo at $42.6 billion — a 28% premium based on its latest share price — might get a deal “across the finish line,” they said.

Over the last year, Anglo’s shares have underperformed rivals including its heavyweight Anglo-Australian suitor. BHP, which trades in London and Sydney, has a market value of about $149 billion. 

Anglo American has long been viewed as a potential target among the largest miners, particularly because it owns big South American copper operations at a time when most of the industry is eager to add reserves and production. However, suitors have been put off by its complicated structure and mix of commodities, and especially its deep exposure to South Africa.

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BHP produced about 1.2 million tons of copper in 2023 on an equity basis, while Anglo’s output was 826,000 tons. That would give the combined group roughly a 10% share of global mine supply. Jefferies said antitrust issues “would likely be a problem” for the deal since governments consider copper a strategic mineral.

Anglo has faced a series of major setbacks over the past year as prices for some of its key products plunged, while operational difficulties have forced the company to slash its production targets — driving down its valuation and leaving the company vulnerable to potential bidders. 

It said in its statement that its board was reviewing the proposal and there was no certainty an offer would be made.

Read: Anglo American Posts Steep Profit Fall and Lowers Dividend 

Big Deals

A successful takeover would represent the first mega deal among the world’s biggest diversified miners in over a decade. BHP and its biggest rivals spent years on the sidelines after a series of disastrous transactions, but have warmed up to the prospect of dealmaking after reassuring investors that they have learned from past mistakes. 

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“We would need to see the price BHP had in mind in order to form a better view,” Adrian Prendergast, senior analyst at Morgans Financial Ltd. said in an emailed note. A takeover of Anglo would be “material but not transformative” for BHP given the size of the target, he said. 

BHP last year bought copper producer OZ Minerals Ltd. for about $6.4 billion in its first major purchase in years, but has otherwise focused until now on selling assets such as oil, gas and coal.

The clear lure here would be Anglo’s South American copper business, long eyed by bigger players in the industry — even though it has recently faced setbacks and has had to reduce its copper production forecasts.

It’s also possible that the proposal for Anglo could now prompt others to make a move. No. 2 miner Rio Tinto Group has also been investing in copper production, while Glencore Plc last year made an unsuccessful offer for Teck Resources Ltd., which has a coveted copper business, before eventually reaching a deal for the Canadian company’s coal assets.

Read: BHP Revives Appetite for Deals With Biggest Rivals in Sights 

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Anglo’s valuation may make it more attractive, but it remains a highly complicated business. The company owns majority stakes in two South African-listed miners — Anglo American Platinum Ltd. and Kumba Iron ore Ltd. — and is the majority owner of diamond miner De Beers. It also has a long and complicated relationship with South Africa, where the state pension fund manager is its biggest shareholder.

BHP’s proposal was to first hand Anglo’s stakes in the two South African businesses to the smaller company’s investors before proceeding with a takeover, Anglo said. The two parts of the proposal would be “interconditional,” it said.

Anglo’s other operations include copper, nickel, steelmaking coal and Brazilian iron ore, as well as the iconic De Beers business.

Both companies are also investing in new fertilizer businesses — BHP is building a massive potash mine in Canada, while Anglo is developing a polyhalite mine on the east coast of England.

—With assistance from Martin Ritchie.

(Updates with charts)

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