Under BHP’s proposal, Anglo’s holdings in its listed Amplats platinum metals and Kumba iron ore subsidiaries would have been distributed to Anglo shareholders, who would then receive BHP’s all-scrip offer for the remaining operations and assets.

Anglo maintains that demerging those companies would be costly and risky and would take 18 months to two years to complete. Given that it would trigger a public interest review by the South African government, resulting in a host of costly concessions, it was concerned its shareholders would be exposed to the risk of non-completion for that 18-month to two-year period.

Anglo’s future now rests on the ability of its chief executive Duncan Wanblad to execute the radical restructuring he suggested in response to the bid.

BHP had a different view and, hours before Wednesday’s deadline, published a list of concessions it was prepared to make to the South African authorities and said it would help provide the funding for them. It believes Anglo has overstated the risks, costs and time involved in effecting the offer.

The risks involved in the approvals process were “quantifiable and manageable”, and BHP was prepared to offer an “appropriate” break fee if it failed to obtain the necessary antitrust and regulatory approvals, the mining giant said.

The nature of BHP’s offer meant that it would also absorb 80 per cent, or about $US1.6 billion, of the estimated $US2 billion of capital gains tax liabilities that would flow from the two demergers.

Given the twin demergers, the takeover offer was undoubtedly complex. But it appears that neither BHP nor anyone else would or could contemplate acquiring Anglo and paying a high takeover premium for two big businesses that are fully exposed to the infrastructure and social problems South Africa has been experiencing.

If not for the “poison pill” aspects of Anglo’s portfolio, someone would have swooped on the company late last year after its share price plunged in response to its announcement of a big reduction in its targeted copper, iron ore and platinum metals production.

Having seen off BHP by effectively refusing any substantive engagement, Anglo’s future – and the future of its board and management – now rests on the ability of its chief executive, Duncan Wanblad, to execute the radical restructuring he suggested in response to the BHP bid.

Anglo’s “Plan B” also involves demerging the Amplats business. While it won’t trigger a public interest test, the South African authorities will inevitably demand concessions (no doubt BHP’s quite lengthy list of the things it was prepared to do will be their starting point), and analysts estimate a capital gains tax bill of around $US1.2 billion.

Unlike BHP’s proposal, where BHP’s current shareholders would have born 80 per cent of the CGT costs, Anglo will have to fund 100 per cent of the cost of demerging Amplats, including the costs of the concessions it has to make.

Anglo also proposes to sell a number of major assets– its De Beers diamond business, its Australian metallurgical coal business, and its nickel operations – to deliver its ambitious plan of emerging as a streamlined copper, iron ore and crop nutrients group in 18 months’ time.

Anglo is capital-constrained. It will mothball its massive and massively expensive Woodsmith polyhalite project in the UK – a project it sees as central to its future and on which it had planned to spend $US1 billion a year for the next few years – and won’t develop it unless it can attract a partner while selling assets and slashing capital expenditures and costs to enable it to fund itself through to the completion of the restructure.

By rejecting BHP’s 47 per cent premium over the price at which Anglo shares traded before the world’s largest miner’s interest in Anglo surfaced, and without access to BHP’s massive balance sheet and cash flows, Anglo is exposed to all the costs and risks of trying to remake itself, in a volatile industry and within an accelerated timeframe.

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Given that without any substantive engagement with BHP, its directors have denied their shareholders the opportunity to even consider the offer, it is unlikely that the Anglo board or management, with the company’s recent record of poor performance, could survive any significant stumble in their execution of the restructuring or any major delays of its timetable. Anglo’s stretched finances may also become an issue.

If it succeeds, of course, Anglo would be a far more attractive proposition, and not just to its own shareholders.

With Amplats, De Beers and other non-central assets gone and only one demerger left to contemplate, BHP and the other major miners would inevitably have another look.

The full potential of Anglo’s first-rate copper and iron ore assets in South America – the assets that were at the heart of BHP’s decision to bid – might not be realised for a while because of the restructuring and Anglo’s limited capital resources.

But they should still be just as attractive to BHP, Glencore and Rio Tinto in 18 months or two years’ time as they are today.

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