Back in October, the boss of Anglo American Plc took some of the company’s top shareholders to dinner. Under pressure to turn around performance, Duncan Wanblad promised there were no “sacred cows” in the portfolio. Now that he’s facing an activist investor, plus a takeover attempt, it’s time to make good on the promise.
Wanblad, who became chief executive officer two years ago, has taken the right steps: Last year, he launched a companywide asset review, typically a prelude for divestments and project cancellations. For a moment, it seemed like he would make good on his promise. Yet shareholders remain in the dark about his concrete plans.
Anglo American, established in 1917 by mining tycoon Ernest Oppenheimer, has always been a mismatch of assets glued together by a century-old brand. Admittedly, the company is today much simpler than the higgledy-piggledy firm of the 1980s. Then, coal, copper and platinum units mixed with subsidiaries involved in pineapple canning, beer brewing and hotels. Nowadays, the London-listed company is all about mining, with five big businesses — copper, iron ore, steelmaking coal, platinum and diamonds — as well as a wannabe expansion area: fertilizer.
Still, it remains more complex than its main rivals, including industry leader BHP Group Ltd, which earlier this month announced a takeover attempt for £31 billion ($38.8 billion). Anglo American quickly — and rightly — rejected the offer, saying undervalues the company. BHP has since made since a second attempt, rising its offer by 15% — only to see it quickly rejected by Anglo American. So far the miner is right in saying no, but executives have yet to offer shareholders a compelling vision of how an independent Anglo American would do better than the deal BHP proposes. For the last decade or so, Anglo American has traded at a discount to its peers, so business as usual isn’t an option.
Wanblad has been waiting to see the latest offer from BHP. The approach made sense — if he’s ready to simplify the company and reduce spending significantly. That’s a big if. Now Anglo American has promised a formal update to investors on May 14, before the market opens in London.
The most obvious — and easy — move is to sell De Beers, the iconic diamond miner in which Anglo American owns an 85% stake. The disposal would make headlines, but not much money, however. Last year, De Beers accounted for just 1% of Anglo American’s earnings before interest, taxes and depreciation (Ebitda) of about $10 billion. De Beers may sound as one of the company’s sacred cows — and thus it may be tempting to think that selling would be bold and would resolve Anglo American’s problems. Neither is true.
The real sacred cow is the Woodsmith mine, a $9 billion project in northern England to mine polyhalite, a mineral that contains potassium, sulfur, magnesium and other nutrients that make it a good fertilizer. It’s a gigantic project, including a 37-kilometer (23- mile) tunnel to transport polyhalite from the mine to a port.
The construction of Woodsmith — a pet project of former CEO Mark Cutifani — is one of the reasons why Anglo American is putting out so much money for a company of its size. The firm is targeting capital expenditure of about $5.7 billion across the next two years. If nothing changes, Anglo American’s spending over the five-year period to 2025 would top $29 billion, on par with the 2010-2014 period when its capex budget also exploded.
Anglo American CEO Needs to Kill Some Darlings
35
0
13.05.2024
Back in October, the boss of Anglo American Plc took some of the company’s top shareholders to dinner. Under pressure to turn around performance, Duncan Wanblad promised there were no “sacred cows” in the portfolio. Now that he’s facing an activist investor, plus a takeover attempt, it’s time to make good on the promise.
Wanblad, who became chief executive officer two years ago, has taken the right steps: Last year, he launched a companywide asset review, typically a prelude for divestments and project cancellations. For a moment, it seemed like he would make good on his promise. Yet shareholders remain in the dark about his concrete plans.
Anglo American, established in 1917 by mining tycoon Ernest Oppenheimer, has always been a mismatch of assets glued together by a century-old brand. Admittedly, the company is today much simpler than the........
© Bloomberg
visit website
login
who are we?
contact us
qosheapp
Toi Staff
Gideon Levy
Belen Fernandez
Tarik Cyril Amar
Rami G Khouri
Dr Ramzy Baroud
Mort Laitner
Petra Lesjak Tušek
