Shares in Anglo American experienced a boost on Monday as analysts tipped it for a potential takeover if the company fails to improve its operations and its share price continues to underperform. At 1213 GMT, shares were up 1.6%, reaching 1.831.20, with the highest point being 1.862.20. In contrast, the FTSE 100 was down 0.5%.
On Friday, the diversified mining company surprised the market by reducing its production guidance for the coming years. It lowered the guidance by 4% in 2024 and an additional 3% in 2025 due to operational challenges at its Los Bronces copper mine in Chile and ongoing logistical issues at its Kumba iron mine in South Africa.
Following this news, shares plummeted by 16%, adding to an already disappointing year for the company’s share price, which is down 43% due to market volatility and decreasing demand for platinum metals and diamonds. The price of diamonds, in particular, has seen a significant decline, with futures dropping by 15% in 2023 so far.
In light of Anglo American’s operational difficulties and poor share performance, Jefferies analysts have raised the possibility of industry consolidation and a potential takeover. They reference Glencore’s proposal to merge with Anglo American in 2009 when Glencore owned 35% of Xstrata.
The analysts believe that Glencore’s strategic fit is even stronger now, especially considering its recent acquisition of the coal assets of Canadian miner Teck Resources. They highlight operating synergies, increased marketing benefits, and a cost of capital arbitrage as contributing factors to a potential takeover.
Given this assessment, the analysts suggest considering the possibility of a takeover as part of the investment case for Anglo American.
Since Chief Executive Duncan Wanblad took over in April 2022, the global miner has witnessed a decline of £33 billion ($41.41 billion) in its market share.
Representatives from both Glencore and Anglo American declined to comment when contacted by Dow Jones Newswires.
Anglo American’s shares experienced a rise amidst speculation of a potential takeover. The company recently adjusted its production guidance due to operational issues, which led to a drop in share price. While Glencore’s previous merger proposal in 2009 is referenced, analysts now highlight even greater potential synergies with Glencore. Overall, the possibility of a takeover is being considered as part of the investment case for Anglo American. Both Glencore and Anglo American declined to comment on the speculation.