The proposed unbundling of Anglo American Platinum (Amplats) by Anglo American, part of the group's most significant restructuring in decades, is expected to incur around $1 billion in capital gains tax (CGT), a cost that has raised concerns among some shareholders.
Coronation, a significant shareholder in Anglo, expressed worries about the friction costs and capital gains tax associated with the company's breakup. The fund manager, overseeing over R600 billion in assets, remains skeptical about the value creation promised by Anglo’s portfolio simplification plan announced recently.
Anglo's strategy includes divesting or demerging its platinum, nickel, steelmaking coal, and diamond businesses, aiming to satisfy shareholders and counter a takeover attempt by rival BHP. Anglo, which holds nearly 80% of Amplats, plans to divest this stake "in a responsible and orderly way."
Nicholas Stein, a portfolio manager at Coronation, criticized the significant expenses involved in the restructuring. He argued that Amplats might be worth less to shareholders outside Anglo’s integrated structure, which previously allowed for focused operations and reliable dividends. Stein noted that the unbundling could lead to substantial selling pressure and capital gains tax liabilities, estimating a $1 billion CGT cost.
Coronation, having disinvested from the platinum group metals (PGM) sector last year, questioned the long-term viability of the industry. Stein emphasized that Coronation prefers indirect exposure to platinum through its holdings in Anglo rather than owning an unbundled Amplats directly.
Ninety One, South Africa's largest asset manager and another top shareholder in Anglo, also acknowledged the $1 billion CGT estimate but was less concerned. Dawid Heyl, a portfolio manager at Ninety One, pointed out that while the CGT is significant, the potential market cap increase from the restructuring could be more substantial.
Amplats would face competition from other PGM producers like Sibanye and Implats if unbundled. The PGM sector has been hit by falling prices, prompting cost-cutting measures across the industry.
Amplats plans to cut 3,700 jobs to reduce costs by R5 billion, while Sibanye-Stillwater and Impala Platinum have also announced significant layoffs.
BHP, having already made two bids for Anglo, is particularly interested in Anglo's copper assets. Anglo's restructuring plan, which will leave it focused on copper, high-grade iron ore, and fertilizers, aims to fend off BHP's advances. Analysts expect BHP to return with an improved offer before the regulatory deadline on May 22.
Johan Barkhuysen of Stonehage Fleming highlighted the pressure on Anglo to simplify its complex portfolio, which trades at a discount to its international peers. He praised Anglo's swift response to BHP's offer, suggesting that while Anglo has temporarily repelled BHP, further bids could follow after the restructuring.
