LONDON, United Kingdom – Global mining giant BHP Group confirmed on Wednesday, May 29, 2024 (EAT), that it has abandoned its ambitious $49 billion (£38.6 billion) takeover bid for rival Anglo American, ending a five-week public battle that could have created the world's largest copper producer. The collapse of what would have been the biggest deal in the mining sector in over a decade has significant implications for the global supply of copper, a metal critical for the world's transition to green energy, and raises questions about future commodity price stability for import-dependent nations like Kenya.

The deal ultimately unraveled over complex structural demands and valuation disagreements. A primary sticking point was BHP's insistence that London-headquartered Anglo American first demerge its majority stakes in two South African-listed companies: Anglo American Platinum (Amplats) and Kumba Iron Ore. Anglo American's board unanimously rejected multiple offers, describing the precondition as "highly complex and unattractive" and arguing it exposed its shareholders to excessive risk and cost. The company stated the proposal was "unprecedented" and would involve navigating a convoluted and costly regulatory process in South Africa.

The proposed merger sent shockwaves through the industry, driven by BHP's strategic desire to acquire Anglo's vast copper assets in Chile and Peru. Had the deal succeeded, the combined entity would have controlled approximately 10% of the global mined copper supply, surpassing Chile's state-owned Codelco as the top producer. This consolidation highlighted intense investor and corporate interest in copper, whose demand is surging due to its essential role in electric vehicles, wind turbines, solar panels, and the expansion of electricity grids. The bid itself contributed to a rally in copper prices, which surged above $10,000 per tonne on the London Metal Exchange in the weeks following the initial offer.

South African Roots and Regional Significance

The deal's fate was significantly influenced by Anglo American's deep historical and economic ties to South Africa. Founded in Johannesburg in 1917, the company has been a cornerstone of the nation's economy for over a century, once accounting for a substantial portion of the Johannesburg Stock Exchange's capitalization. The South African government, which holds a significant stake in Anglo through its Public Investment Corporation, expressed reservations. Minerals Resources Minister Gwede Mantashe publicly stated he would not support the deal in its proposed form, citing a negative past experience with BHP's 2001 merger with Billiton. The Presidency also rejected the narrative that BHP's desire to hive off the South African assets was a vote of no confidence in the country's investment climate.

For Southern Africa, the collapse provides a degree of stability for the thousands employed by Amplats and Kumba Iron Ore. It also has major implications for Botswana, where the government is a joint owner of the diamond giant De Beers alongside Anglo American. Following the failed bid, Anglo American announced its own radical restructuring plan, which includes divesting or demerging its diamond, platinum, and coal businesses to focus on copper and iron ore. This strategic pivot, forced by the takeover battle, will still reshape the mining landscape in the region.

Implications for Kenya and East Africa

While the failed merger has no direct operational impact on Kenya, its secondary effects on global commodity markets are highly relevant. Kenya's economy is sensitive to fluctuations in the price of industrial metals. In 2023, Kenya imported approximately $61 million worth of copper articles, essential for its construction, manufacturing, and electrical industries. Copper wire alone accounted for nearly $50 million of these imports, primarily sourced from the United Arab Emirates, Egypt, and Zambia.

The uncertainty surrounding a major copper producer like Anglo American and the potential for future consolidation in the mining sector could lead to increased price volatility. A tighter, more consolidated copper market could result in higher import costs for Kenyan businesses, potentially impacting project budgets in critical sectors like infrastructure and housing, and feeding into consumer inflation. The focus on copper as a strategic 'future-facing' commodity underscores the importance for Kenya to monitor global supply chain dynamics. As the world accelerates its green energy transition, the demand for copper is forecast to outstrip supply, making stable and predictable access to the metal a key economic concern. The high-stakes battle between BHP and Anglo American serves as a clear indicator of the fierce competition for resources that will define the global economy in the coming decades.