Anglo American

Time to say goodbye and plan ahead for the second leg of the trade

Yesterday was a bittersweet day at Shrubstack, as we bid goodbye to our largest holding, Anglo American. Following the takeover offer by BHP, the stock is +50% from entry just 2 months ago, so we took the money and ran.

I think the £25 per share offer is a low-ball bid. Frankly, I expected £30. I don’t expect this to be the last offer by BHP, so maybe they bump their offer to £27-28 and get it across the line. Anglo American has already rejected the offer, saying that it “significantly undervalues” the company.

And then there’s a small chance of a counterbid by Rio or some Sovereign Wealth Fund that magically appears (unless they just throw their money away on AI).

So why sell now?

Frankly, I don’t want to bother with the merger arb side of the trade. It’s a lengthy, complex deal that involves 2 spin-offs and significant regulatory scrutiny. On top, there are elections in South Africa in 2 months and Anglo’s main shareholder is the South African Pension Fund. In an election year, the politicians like to make noises about these things. The South African Minister for Mineral Resources already came out “unofficially” against the deal.

However, I’m already thinking ahead and getting excited for Part Two of the Anglo American trade. It’s still early days but I’ll share the thinking anyway.