The $60 billion game that BHP boss Mike Henry needs to win

Most contested takeovers often boil down to a game of chicken between the predator and the prey but has BHP bitten off more than it can chew with its $60 billion tilt for fellow resources heavyweight, UK-based Anglo American?the initial offer, BHP needs to find the pricing sweet spot that will win it its prize. An offer that’s not so generous that it burns BHP shareholders but just enticing enough for Anglo American investors to bite.

Activist investor Elliott Management has already bobbed up on the share register of Anglo American and is almost certain to push BHP to pay up.BHP clearly has the cash to do that and Anglo American’s substantial copper assets make it a prize, but the real test for BHP’s boss, Mike Henry, is if he has the gumption to walk away from a deal that will not only define his career but possibly the future of the miner.

If he can pull it off, Henry will avoid retracing the footsteps of previous BHP bosses, such as Marius Kloppers, who ended up wasting billions of dollars on empire building acquisitions only to have them go pear-shaped.And buying Anglo American is going to be one big, messy affair. There are plenty of assets inside Anglo American that BHP isn’t interested in buying and the terms of the initial offer flagged spinning off some of Anglo’s less favourable assets.

By BHP’s standards, its $10 billion play for OzMinerals was at the smaller end of the scale. The $220 billion mining giant needs a far bigger acquisition to move the dial. And Anglo American, or more particularly its copper assets, fits the bill.It also ticks a number of other boxes for BHP, the most significant of which is the UK-based target’s underperforming share price.

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