Introduction: BHP proposes takeover of Anglo American
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
There’s takeover excitement in the mining world this morning after Australia’s BHP made a takeover approach for smaller rival Anglo American
The deal, if completed, would be one of the largest in the sector for years, and create the world’s biggest copper miner.
Anglo confirmed overnight that it had received an “unsolicited, non-binding and highly conditional” all-share buyout proposal from BHP Group, which it is currently examining.
The proposal is conditional on Anglo first splitting off its South African platinum and iron ore units, suggesting BHP is primarily interested in Anglo’s copper resources.
Anglo says:
The Board is currently reviewing this proposal with its advisers. There can be no certainty that any offer will be made nor as to the terms on which any such offer might be made.
Pending any further announcements Anglo American shareholders should take no action. A further announcement will be made as and when appropriate.
Anglo had been seen as a potential takeover target since late last year, when it warned that production had been weaker than expected. Shares are down around 10% over the last 12 months.
BHP’s interest in acquiring Anglo raises fresh concerns about an exodus of UK firms from London.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, explains:
‘’The buyout offer from BHP, the world’s largest publicly listed miner, for Anglo American, won’t just shake up the mining industry, but will send a fresh chill through the City of London
There are concerns that if the deal goes through it could be the tip of the iceberg and more giants could leave the exchange. It comes hot on the heels of speculation that Shell might up sticks and leave for New York, rumours that Ocado may be considering leaving for the Big Apple, and follows the crushing disappointment of home-grown chip designer Arm choosing the Nasdaq over the FTSE 100.
The agenda
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9am BST: European Central Bank’s economic bulletin
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11am BST: CBI’s distributive trades survey of UK retailers
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1.30pm BST: US GDP report for Q1 2024
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3pm BST: US pending home sales data for March
Key events
AstraZeneca boss defends pay deal after results beat forecasts
Julia Kollewe
AstraZeneca’s boss has defended his pay package as necessary to ensure the company can attract a high-calibre successor one day, as he hailed “unprecedented” lung cancer trial results, and cancer treatments propelled sales at Britain’s biggest drugmaker higher.
Pascal Soriot, chief executive of the Anglo-Swedish pharma company, has come under fire for his potential £18.7m maximum pay package, which was recently approved despite a sizeable shareholder rebellion.
He told journalists:
“Of course, I am committed to this company. It really is about making the company competitive and attractive for my successor because I intend to be here for a while still but of course at some point there will be a successor, and our internal candidates but also external candidates will have to be offered a role that is attractive in itself but also compensated competitively.
We are not a UK domestic organisation, we are a UK-based global company. Most of our sales come from outside of this country… And this industry is a global industry and… a lot of the talent is based in the United States… The innovation in our industry is now more and more driven by the United States and China. Europe is unfortunately falling behind.”
The drugmaker beat analysts’ expectations with a 19% rise in total revenues in the first three months of the year to $12.7bn. Oncology drug sales grew by 26% while cardiovascular and metabolic treatments grew by 23%, respiratory drugs by 17% and rare disease treatments by 16%.
Soriot said recent trial results for Tagrisso and Imfinzi, two of its blockbuster cancer drugs, were “unprecedented in lung cancer”. Tagrisso showed “overwhelming efficacy” in a trial for non-small cell lung cancer in February while Imfinzi was the first and only immunotherapy treatment to show survival benefit in small cell lung cancer.
Soriot said that AstraZeneca is moving the weight loss pill it is developing with the Chinese company Eccogene into intermediate clinical trials. It is targeting people who want to lose a limited amount of weight (5-10% of body weight), as well as obese people who will receive a higher dose.
It intends to combine the GLP-1 drug, which aims to reduce appetite, with other drugs the firm is working on to help people lose weight and reduce the risk of heart disease.
Recent research from Morgan Stanley has shown that people using GLP-1 drugs such as Novo Nordisk’s Ozempic and Wegovy and Eli Lilly’s Mounjaro and Zepbound reduce their consumption of tobacco and alcohol – an added health benefit beyond weight loss.
The drugs have proved hugely popular with celebrities and others, despite their high price tag, and have brought in billions of dollars of revenues for Novo and Eli.
The boss of the London Stock Exchange group says the listings pipeline for the market is “encouraging”, even as BHP plots to remove Anglo American from the roster.
David Schwimmer told the exchange’s annual shareholder meeting this morning that:
“We are very pleased with the direction of travel for the London market.”
In the UK housing market, builder Persimmon has reaffirmed its annual home-build targets after its sales rate picked up this year.
CEO Dean Finch says trading over recent weeks has been encouraging with robust visitor numbers and enquiries, which gives Persimmon confidence about its outlook for the remainder of the year.
Finch adds:
Overall, our private forward order book is up 18% on the prior year with the embedded private average selling price ahead of the position at the start of the year.
Speaking of Sainsbury’s…. its customers have faced disruption to online orders on Thursday morning due to a new “technical issue” at the retailer.
The UK’s second largest supermarket chain said the issue affected a small number of customers but has now been resolved.
A spokeswoman for the company said:
“A small technical issue affected some groceries online orders this morning.
“We have contacted these customers directly to apologise for the inconvenience.”
Several shoppers have flagged problems on X:
Sainsbury’s say they are working to sort the tech issues as quickly as possible.
The boss of UK supermarket group Sainsbury’s has warned that delays to shipments through the Red Sea have led to “a bit” of disruption to clothing supplies in the last few months.
Simon Roberts also told reporters this morning that food inflation is likely to remain in “low single digits” this year
Roberts was speaking after Sainsbury’s told shareholders it was confident of delivering strong profit growth in the year ahead. It reported a 15% drop in pretax profits for the year to 2 March 2024 this morning, although underlying profits rose 1.6%.
FTSE 100 clears 8100 points for first time
The London stock market rally continues, with the FTSE 100 hitting a new intraday record high of 8102.14 points this morning.
The 0.7% rally is being driven by Anglo American, and also relief at the strong results from AstraZeneca and Unilever this morning.
The jump in Anglo American’s share price morning, close to BHP’s offer, suggests. there is a reasonably high probability of the proposal succeeding, says Andrew Keen of investment research and consultancy firm Edison Group.
Keen adds, though, that the deal is likely to take some time to play out.
Premiums for successful M&A in large cap mining are often in the order of 30%. Anglo’s announcement indicates that the approach has been made on an all-share basis, but cash components can be used as sweeteners and initial offers are often improved.
Anglo has had a spate of operational issues recently and now needs to argue it is the best owner of its assets. If an alternative bidder emerges, its likely the debate will switch to the value of the competing offers.
The prospect of Anglo American being taken over comes at “crisis time” for the London stock exchange, argues Dan Coatsworth, investment analyst at AJ Bell.
He explains:
“The London stock market is shrinking fast as companies are either taken over, switch listing to the US or delist to get out of the public’s eye.
It’s crisis time for the London Stock Exchange as it fights to preserve the integrity of the UK market.”
BHP’s interest comes at a tricky time for LSE boss David Schwimmer, with shareholders due to vote today on whether his maximum pay packet should be almost doubled.
Although Anglo’s shares have surged 13%, shares in BHP’s London-listed shares are down 2.5% this morning.
BHP was removed from the FTSE 100 in 2021 after deciding to shift its main listing to Sydney, and abandon a dual listing in London.
UK advertising spend drops amid brutal market
Jane Croft
UK advertising spend reached £36.6bn in 2023 representing a real term contraction of 1.2% and underscoring the brutal advertising downturn in TV, regional media and magazine advertising, according to a new report.
The UK’s advertising market rose by 6.1% last year, but this equates to a 1.2% contraction in real terms after accounting for high inflation, according to the latest annual Advertising Association/WARC Expenditure analysis.
Advertising is seen as a bellwether of the economic climate and in the past year the sector has been buffeted as corporate clients cut back on spending. This has hit broadcasters such as ITV and Channel 4. Dame Carolyn McCall, chief executive of ITV last year said that the industry was in the “worst advertising recession since the global financial crisis.”
The AA/ WARC report found that TV advertising spend fell almost 9% dropping from £5.3bn in 2022 to £4.9bn last year. Advertising spend in magazine brands was also hit badly falling 9% from £553.8m in 2022 to £503.3m last year and in regional media brands it fell almost 10% from £505.2m in 2022 to £454.2m last year.
The report is more optimistic about 2024 forecasting that advertising spend will rise by 5.8% to reach £38.8bn in 2024.
Advertisers will be investing more in brand-building campaigns in 2024, the report says which will help an advertising recovery along with a number of high profile sporting events such as the Euro football championships in June, and the Paris Olympics in July along with the upcoming UK general election.
James McDonald, director of data, intelligence & forecasting at WARC, said:
“Our latest survey of media owners confirms 2023 as a challenging year for most, with few properties recording gains and spend instead further consolidating within search and online display formats– particularly social media.
“Our forecasts assume that the UK’s economy will begin to break from the pattern of stagnation that has come to define recent quarters. Easing inflation over the coming 18 months should encourage more favourable trading conditions within the advertising sector, facilitating growth across a broader range of channels in turn.”
WSJ: Anglo considers sale of diamond unit De Beers
Interestingly, the Wall Street Journal is reporting that Anglo American is considering a sale of its diamond business De Beers.
The WSJ says Anglo has had discussions with potential buyers, in a separate process from BHP’s takeover bid.
It adds:
The London-listed company has held conversations in recent weeks with potential buyers, including luxury houses and Gulf sovereign-wealth funds, the people said. Anglo has signaled to potential suitors that it is open to offers, according to people familiar with the matter.
This plan wouldn’t appear to derail BHP’s ambitions, given it appears to be interested in Anglo’s copper production arm. Forbes are reporting that the De Beers diamond business is “certain to be sold” if the BHP deal goes through.
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