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Investors Give Lukewarm Response to Anglo American’s Break-Up Plans

FTSE 100 mining giant Anglo American made headlines with its decision to break itself up following the rejection of a takeover bid from Australian rival BHP. This strategic move aims to prevent support for any potential acquisition attempts by BHP.

The company announced its intentions to sell or demerge its 85% stake in De Beers, the world’s largest diamond miner. Additionally, Anglo American plans to divest its thermal coal assets and separate its shareholding in Amplats.

Moreover, the company revealed its focus on concentrating on copper, iron ore, and crop nutrient assets in the future. Despite these restructuring efforts, potential job losses loom as the company scales back operations on the Moorside mineral fertiliser mining project in North Yorkshire.

Following the rejection of BHP’s £34 billion bid, Anglo American emphasized that the offer significantly undervalued the company and was not in the best interest of its shareholders. In response, the firm unveiled a cost-saving plan projected to reduce annual expenses by $1.7 billion.

CEO Duncan Wanbled highlighted the anticipated benefits of the streamlined business model, saying, “We expect that a radically simpler business will deliver sustainable incremental value creation through a step change in operational performance and cost reduction.”

Despite these efforts, Anglo American’s share prices dipped over 2.5% post-announcement, indicating investor skepticism towards the company’s new direction.

Amidst ongoing discussions with stakeholders since the initial takeover approach by BHP in April, Anglo American’s strategic shift follows a comprehensive asset review earlier in the year prompted by a sharp decline in annual profits and writedowns in its diamond and nickel operations.

In light of the lukewarm market response, AJ Bell investment director Russ Mould expressed concerns, questioning the timing of such radical actions only in response to external takeover pressures.

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