After two near-death experiences in the past decade, Anglo American’s decision to enter into a $60bn “merger” with Canadian copper and zinc producer Teck Resources to create Anglo-Teck will be the final death knell to the company, which exited its investment in Valterra Platinum in April. After the so-called merger, Anglo-Teck will be left with just one asset in South Africa, Kumba Iron Ore, which had 14,766 employees at end-2024. According to some analysts, Kumba will also eventually be sold.
In a research note, JP Morgan Cazenove wrote: “We expect that if this merger is completed, iron ore could eventually be divested or demerged to create a copper pure play.” Under this scenario Anglo could end up with no employees in South Africa. A decade ago it employed 88,661 people in the country. A complete exit would be a sad ending for Anglo, which Ernest Oppenheimer established in 1917 and grew into the country’s largest company.
Over the next 77 years Anglo expanded into mining, industry and finance in South Africa and acquired international assets. After 1994 there was a huge restructuring of South African mining houses, including Anglo, in response to investor demands for sector focus and the simplification of complex ownership structures. In 1999 Anglo listed on the London Stock Exchange while retaining a secondary listing on the JSE.
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It took more than a decade to dispose of its non-mining interests but Anglo did become a focused mining company. Yet its track record in mergers & acquisitions has been dismal. A “merger” between Anglo and Teck will merely illustrate the folly of allowing mining companies to play Monopoly with a country’s natural resources.
SA’s natural resources belong to its people, not the companies that mine them. It was a mistake to allow companies such as Anglo to exit South Africa and have primary listings in London in the first place. Anglo had its first near-death experience on January 18 2016, when its shares plunged to a low of R55, valuing the company at $4.7bn (R79bn) — less than half of its net debt, which had soared to $13bn at end-December 2015 from $1.4bn in 2011.
The company had made some costly mistakes, such as investing $14bn in the Minas Rio iron ore project in Brazil at the top of the commodity cycle, and paying shareholders special dividends totalling $5bn during the good times. Anglo announced a restructuring plan that involved shedding numerous assets. But after a spectacular rerating of its shares in 2016 on the back of firmer iron ore prices and progress in asset sales, it tempered its plans.
In April 2024 Anglo said it had received a $39bn offer from BHP, which was conditional on demerging its stakes in Valterra and Kumba. BHP’s target was Anglo’s copper mines in Chile and Peru. The offer would have resulted in the end of Anglo and its listing on the JSE.
During both episodes — in 2016 and 2024 — the best option for SA Inc would have been a demerger of Anglo’s South African assets into a new national mining champion with state (Public Investment Corporation and Industrial Development Corporation), community, worker and empowerment shareholders having a majority stake in the company. South Africa should have supported the BHP offer, which offered a perfect opportunity to create a national mining champion. Anglo management fought the BHP offer and announced a plan to focus on copper and iron ore and shed non-core assets.
Since then Anglo has implemented a demerger of Valterra and announced plans to sell its steelmaking coal, nickel and diamond businesses. But it encountered problems with all these asset sales. On September 9 this year Anglo announced “a merger of equals” with Teck Resources to create a company that will focus on copper, iron ore and zinc.
But the proposed transaction that was disclosed was more like a takeover, to the benefit of Anglo executives, Teck and the Canadian economy. On every metric, this is not “a merger of equals”. Anglo is far larger than Teck, even after the new company has sold assets from the Anglo side of the business.
Anglo has a market capitalisation of $42bn, double Teck’s $20bn. Talk of “a merger of equals” is political — to justify giving most of the benefits to Canada after intense pressure from its government, including Prime Minister Mark Carney.
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