The potential acquisition of Anglo American Plc by The BHP Group has caused quite a stir in South Africa, with JPMorgan Chase & Co. estimating a potential outflow of $4.3 billion if the deal goes through. This could weaken the rand, which has recently seen a 4.4% increase against the dollar, the largest gain in five weeks among major currencies tracked by Bloomberg.
The deal proposed by BHP, which was initially rejected by Anglo, would involve the distribution of dividends from their South African metal and platinum units to shareholders. This has raised concerns among officials and analysts, including Catherine Cunningham from JPMorgan, who believes it could lead to significant money outflows from index funds for developed market investors.
Despite rejecting BHP’s $49 billion offer, Anglo has agreed to enter into discussions with the company, with a firm offer expected by May 29. If successful, the deal could also impact unit prices for Anglo American Platinum Ltd. and Kumba Iron Ore Ltd.
Cunningham remains cautiously optimistic about the potential deal, stating that there are visible opportunities for BHP to reach an agreement. However, the impact on the rand remains uncertain. Market funds are expected to sell $9.4 billion in shares, while emerging market investors may buy $5.1 billion, according to JPMorgan’s estimates.
The separation of the companies could also have broader implications, adding $14.2 billion to South Africa’s MSCI index market capitalization. As Anglo considers a restructuring plan, which may involve spinning off Anglo Platinum while keeping control of Kumba, the future of the mining industry in South Africa remains uncertain.
