Amplats falls after parent Anglo starts cutting majority stake

Anglo American Plc said it sold 13.94 million shares in Anglo American Platinum in a move to increase the South African firm’s free float ahead of a full exit.

The shares were sold at R515 apiece, raising R7.2 billion, London-listed Anglo said in a statement on Wednesday. That represented about 5.3% of Amplats’s total issued ordinary shares.

On Tuesday Anglo American South Africa announced the ‘accelerated bookbuild’ involving roughly 5% of its shares in Anglo Platinum (Amplats) as part of a previously announced plan to demerge its 78.56% stake in the world’s largest platinum group metals (PGM) producer.

A bookbuild is a process of discovering what investors are prepared to pay for shares in advance of a sale.

Amplats shares were down as much as 9.2% as trading opened in Johannesburg where Anglo’s platinum-group metals subsidiary is listed. That’s the largest drop since April.

Anglo American successfully resisted BHP’s attempted takeover earlier this year by promising it could do a better job of uncorking value in the business, primarily by exiting its platinum, diamonds and coal businesses. The bookbuild announcement is the first step in that process.

The sale on Tuesday cut the number of Amplats shares to be distributed among Anglo shareholders and thus reduced so-called flowback — referring to investors offloading shares obtained through a merger or spinoff, for example, because their mandates don’t allow them to hold a stock.

The sale — at a 20% discount to the 30-day average share price — “may signal the extent of the value leakage in the restructuring process,” Bloomberg Intelligence analysts Grant Sporre and Alon Olsha wrote in a note.

Anglo’s persistent discount to net asset value painted a takeover target on its back, which BHP believed it could eliminate by ditching those parts of the business reckoned to be a drain on performance, such as Amplats and Kumba Iron Ore.

As both of these businesses are based in SA, this was interpreted as a vote of no confidence in the country.

London listing

During its recent interim results presentation, Anglo American announced that Amplats was considering a listing in London while retaining its primary listing on the JSE.

“Through this placing we are moving proactively to distribute some of our Anglo American Platinum shares into the hands of a wider range of investors ahead of the planned demerger,” said Anglo American CEO Duncan Wanblad in a statement.

“This is expected to increase share trading liquidity in the near term as well as mitigate the impact of flowback following the demerger as a result of fewer Anglo American Platinum shares being distributed to Anglo American’s shareholders.”

The proceeds from the share sale will reduce Anglo American’s net debt as part of a programme to refocus the group around copper, premium iron ore and crop nutrients.

Anglo’s restructuring – of which the bookbuild is a part – is intended to drive sustainable earnings into the future.

Anglo American’s share price spiked almost 30% following the announcement of the BHP bid in April, but it has since returned to pre-bid levels following weak interim results for the six months to June 2024.

Revenue was down 8%, and earnings per share were down 23%.

Amplats suffered a 19% slump in revenue for the six months to June 2024 due to falling PGM prices and reduced mining margins.

Anglo American SA is wholly owned by Anglo American plc. The group says it reserves the right to close the bookbuilding process at any time and will announce the results in due course.