Anglo American gears up for rerating as demerger looms and M&A speculation swirls

Anglo American is approaching a pivotal moment in its restructuring story, with UBS flagging a potential rerating as the group prepares to spin off its platinum business and move closer to a copper-focused identity.

The Swiss bank believes the upcoming demerger of Anglo American Platinum on 31 May will remove a key obstacle to a corporate bid, re-opening the possibility of a takeover—either from BHP, which failed in its recent approach, or another buyer.

UBS argues that Anglo has the most attractive portfolio of copper assets among the global mining majors, and expects around 70% of its earnings before interest, tax, depreciation and amortisation to come from copper by 2026.

That shift in profile could prompt the market to reassess the stock more in line with pure-play copper producers, which currently trade on higher valuation multiples.

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Despite recent volatility, Anglo’s shares look undervalued. On UBS estimates, the stock trades on 7.6x forward EV/EBITDA compared with 8.4x for the copper peer group.

At spot commodity prices, that multiple drops to 6.9x, well below the 9.3x sector average. The bank sees 20–50% share price upside even in a stable commodity price environment, assuming a more appropriate 8x multiple is applied.

On that basis, it maintains a “buy” rating with a 2,750p target price, up from the current 2,098p.

Beyond the re-rating argument, the demerger also lifts a structural hurdle to merger and acquisition activity.

UBS notes that Anglo’s diversified portfolio, spanning copper, iron ore, diamonds and platinum group metals, has historically made it difficult for suitors to justify a full takeover. Once Anglo exits platinum and potentially De Beers and its metallurgical coal business, its asset base becomes more streamlined and easier to value.

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The exit from De Beers remains on track, with either a trade sale or initial public offering still expected in the second half of 2025. Botswana, a key partner in the business, recently said serious buyers are showing interest and indicated it may be willing to increase its stake.

UBS values the De Beers business at $4–5 billion, above the $3 billion consensus, with the potential to sell the brand separately from the upstream assets.

Meanwhile, the sale of Anglo’s met-coal division to Peabody faces complications after a gas ignition incident at the Moranbah North mine. Peabody claims the event constitutes a “material adverse change”, which would allow it to walk away from the $3.8 billion deal.

Anglo disagrees and is pushing ahead with recovery and regulatory clearance. UBS believes even if Peabody withdraws, Anglo could sell to other interested parties such as Yancoal or Stanmore, and pursue compensation in the UK courts. At worst, the value hit could be up to $1.5 billion, but UBS thinks this is manageable and unlikely to derail the broader strategy.

The prospect of another approach from BHP also remains alive. UBS says BHP remains interested in Anglo’s copper assets and that the logic for a deal is still compelling.

The original proposal, which valued Anglo at over £31 per share before market weakness, was rejected on grounds of complexity and structure. But as Anglo reshapes itself and BHP looks for strategic growth in copper, the door could reopen.

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For private investors, Anglo now sits at an inflexion point. Earnings are still under pressure from weaker commodity prices, but the strategic direction is clear.

The company is becoming more focused, more predictable and more aligned with the long-term demand growth for copper. UBS forecasts a steady rise in attributable EBITDA from $4.2 billion this year to $7.2 billion in 2028, driven by volume growth and lower costs.

Dividend yields are expected to rise from 1.6% to 3.8% over the same period, underpinned by a policy of paying out 40% of earnings. Free cash flow will also recover strongly, aided by lower capital expenditure and stabilising tax and interest costs.

In summary, Anglo is shedding complexity, realigning around copper and rebuilding credibility in the capital markets.

With a catalyst-rich calendar ahead and upside potential even without a bid, UBS’s view is that the stock deserves a second look. For long-term investors willing to back the shift, the rerating story may only just be getting started.

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