South Africa scrutinises BHP bid for Anglo weeks before election

As well as its mines in South Africa, Anglo also owns platinum assets in Zimbabwe and diamond mines in Botswana and Namibia via its De Beers unit. South African state asset manager the Public Investment Corporation, which holds about 7% of Anglo's shares, said it was assessing BHP's bid "to ensure value creation" in a critical part of the economy.

South Africa's government is scrutinising BHP Group's proposed deal to buy Anglo American, a spokesperson said, with the deal likely to concern officials the coming weeks before a general election where the governing party's majority is at risk. The deal worth about $39 billion would involve Anglo exiting its platinum and iron ore assets in South Africa.

It could trigger large capital outflows and further dent the country's reputation as a destination for mining investment. Anglo's potential exit would mark the end of an era for a company founded in Johannesburg over a century ago.

South African miners have been cutting thousands of jobs, curbing investments and paying much less tax in response to weakening metals prices and a myriad of local challenges including a crisis at the state port and freight rail company. Stagnant economic growth and high unemployment are hot-button issues in the lead-up to the May 29 election, where polls suggest the African National Congress could lose its parliamentary majority for the first time since the end of apartheid.

The government will take guidance from a regulatory unit in the Department of Mineral Resources and Energy (DMRE) before taking a position on BHP's bid, a DMRE spokesperson said. In comments to the Financial Times, South Africa's mining minister Gwede Mantashe said he was personally wary of BHP's proposal as the country's previous experience with BHP was "not positive". He did not respond to Reuters requests for comment.

END OF AN ERA? Founded by gold and diamond baron Ernest Oppenheimer at the peak of the World War One in 1917, Anglo American has been synonymous with South African mining for decades and helped lay the foundation for the country's industrial growth.

It employs roughly 45,000 people in South Africa, though its platinum unit Anglo American Platinum has announced plans to cut 3,700 jobs while another unit, Kumba Iron Ore , plans 490 job cuts. BHP's proposal is not yet a formal offer, and two sources told Reuters that Anglo's management does not consider it attractive.

Unbundling Anglo's platinum and iron ore assets in South Africa could cause capital outflows because investors who hold Anglo's stock because of its diversified portfolio may choose to exit the unbundled assets. As well as its mines in South Africa, Anglo also owns platinum assets in Zimbabwe and diamond mines in Botswana and Namibia via its De Beers unit.

South African state asset manager the Public Investment Corporation, which holds about 7% of Anglo's shares, said it was assessing BHP's bid "to ensure value creation" in a critical part of the economy. The bid will also be studied by South African competition authorities.

Among other issues, the competition watchdog requires companies to set out how they plan to maintain Black participation in firms, including through equity stakes, and aim to prevent job losses. When the world's largest brewer Anheuser-Busch InBev gained conditional approval for its $100 billion-plus acquisition of South Africa's SABMiller, it was prohibited from laying off any South African employees as a result of the merger, a condition which was required to endure in perpetuity.

(Additional reporting by Nqobile Dludla and Bhargav Acharya; Writing by Alexander Winning and Olivia Kumwenda-Mtambo; Editing by Silvia Aloisi and David Evans)

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