A Glencore Bid For Anglo American Wouldn’t Surprise BofA

A report from Reuters last week stated that commodities firm Glencore (LON: GLEN) is assessing a potential approach for Anglo American (LON: AAL), a move that would not surprise analysts at Bank of America. 

Reuters suggests that Glencore's potential approach could ignite a fierce bidding war for Anglo American. This comes on the heels of AAL's rejection of a substantial $39 billion all-stock proposal from BHP Group (ASX: BHP), the leading global miner. Such a scenario could significantly alter the landscape of the mining industry.

The publication, citing sources, said Glencore has not yet approached Anglo American, with the discussions currently internal and at a preliminary stage. 

Furthermore, the report states that BHP could make an improved offer for AAL. The company currently has until May 22 to make a formal bid. 

Reacting to the recent report, Bank of America said in a note that from its discussions, investors have been considering Glencore as a potential bidder for AAL, given that it is a big mining company “with the size, balance sheet and potential asset synergies for which a deal could make sense.”

“We believe that, at the margin, Glencore is more comfortable operating in South Africa in a way that BHP is perhaps not (given GLEN already operates there),” said BofA. 

As a result, they think some key concerns around flowback on local subsidiaries might be less of an issue for Glencore than for BHP. The bank noted that Glencore and Anglo American shared ownership of the Collahuasi mine in Chile, while they also have material copper mining footprints in the Southern Peru region.