BHP boss hopes a week is a long time in dealmaking

What more can BHP BHP boss Mike Henry do in seven days to seal a deal with Anglo American AAL that he hasn't already tried during his month-long campaign? That's the extra time his quarry on Wednesday secured from the UK Takeover Panel for him to make a revised and formal offer - while rejecting his latest proposal valuing Anglo at $46 billion. With Henry calling the increased share ratio on the table "final", he would, on the face of it, seem to have little chance of success. The trick is to convince his target that its own breakup plan is more risky than his three-step approach.

Henry only wants to buy Anglo if his target first hands to shareholders its majority stakes in two South Africa-listed subsidiaries. That could take months or a year and, argues Anglo Chair Stuart Chambers, is rife with execution risk that would disproportionately fall on the smaller company's investors.

However, the breakup plan Anglo CEO Duncan Wanblad has devised to try to fend off its suitor looks even more complex. He wants to sell or spin off five different assets in several countries - including diamond unit De Beers, the Australian coking coal division, and one of the two South African firms BHP wants to offload. Moreover, he's giving himself until the end of next year to do so.

In effect, then, the takeover saga has become a battle of egos over which CEO can be more convincing to stakeholders about surmounting his respective plan's challenges.

Wanblad has the advantage of knowing his company's assets well. But he doesn't have much leeway for mistakes: Anglo's stock was a laggard before BHP got involved due to a number of missteps.

Henry has a track record for getting deals done. But he has also staked his reputation on being a disciplined buyer. Even if he wins the ego fight, he may need to bump up the price to seal the deal. There's enough wriggle room in the UK takeover rules to do so. But even justifying that latest increase without sharing more details on bumper cost cuts is looking harder.

Former UK Prime Minister Harold Wilson is credited with uttering the phrase "a week is a long time in politics". Henry will be hoping the same can be true of dealmaking - as long as it ends in his favour.

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CONTEXT NEWS

Anglo American said on May 22 it has received approval from the UK Takeover Panel to extend by a week to May 29 the deadline for BHP to either make a formal offer for the company or withdraw from the process.

Anglo made the announcement while also rejecting a third takeover proposal from BHP that increased the ratio of BHP shares Anglo stockholders would receive for each Anglo share they own. The new proposal, said the target, values the company at 36.4 billion pounds ($45.5 billion).