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Nov 14, 2011
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Anglo American climbs on $5.4 billion Chile stake sale

By
Reuters
Published
Nov 14, 2011

LONDON - Global miner Anglo American's (AAL.L) shares rose 4 percent on Thursday after it sold a stake in its southern Chilean copper business for $5.4 billion, a surprise move that signaled an aggressive stance in negotiations with state-owned Codelco.

Anglo American
Pouring molten metal / Photo: Corbis

Anglo said on Wednesday it had sold a 24.5 percent stake in Anglo American Sur to Japanede group Mitsubishi Corp (8058.T), valuing the assets at $22 billion and reducing the stake Codelco can buy in January through a long-held option.

Codelco -- which before the deal could have taken up to 49 percent in Anglo American Sur -- has said Anglo was undermining its option to take a stake and has signaled it could seek to sue the London-listed miner.

"Of course there is a risk (of a courtroom battle). But it comes down to what is in the original contract," Collins Stewart analyst John McGloin said, referring to the option contract with Codelco.

"I doubt (Anglo) would have taken the steps that they have if they did not feel pretty confident that it was legal and I doubt that Mitsubishi would have stepped up to the plate if they were not confident it would go through."

Codelco chief executive Diego Hernandez has said Anglo violated good faith under Chilean law.

Anglo on Thursday reiterated it was wholly confident its move was compliant with the Codelco agreement.

Anglo began to meet other parties including Mitsubishi after talks in which it sought to buy out the option failed.

It approached Mitsubishi afresh after Codelco said last month it planned to exercise the option in January.

RBS analysts said the deal's valuation -- 17.4 times EV/EBITDA compared to 13.2 times for other copper transactions over the past 12 months -- reflected "the lack of significant copper opportunities available and the desperation that Japan has in securing access to copper concentrates."

Others pointed out Anglo had secured for 24.5 percent virtually the same amount the market had expected it to achieve in a sale of 49 percent to Codelco, based on the $6.75 billion bridge loan the state-owned miner secured with Mitsui (8031.T). That would have valued Anglo American Sur at around $13.8 billion.

Anglo has said that under the terms of the deal it could still seek to sell an additional stake in Anglo American Sur, up to the moment in which Codelco exercises the option.

"We expect extreme rancor from Codelco on valuation grounds, plus it can now only acquire 24.5 percent ... therefore this has the potential to scupper its side deal with Mitsui," Liberum analysts said in a note.

"The speed and boldness of Anglo American's M&A guile in the last week has materially exceeded market expectations."

Anglo surprised the market on Friday with news it would take control of diamond producer De Beers, buying out the Oppenheimer family in a $5.1 billion deal.

(Reporting by Clara Ferreira-Marques; Editing by Dan Lalor)

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