Several sources close to the Apollo Global Management purchase of Anglo American’s Australian assets say the deal is now off following prolonged and unsuccessful negotiations.
The deal had been expected to go through by most analysts but complications related to a surge in the coking coal market this year put a spanner in the works.
According to those close to the matter, the Anglo American board decided to block the deal after taking a closer look at the $1.5 billion valuation for the Australian assets.
“What usually happens in these cases is that both parties agree on a mechanism to lock in any future price adjustments in the market,” said Anthony Russell, Senior Vice President at Monex BMO Securities.
“The Anglo board obviously feels that the original valuation is way off base and any price rise re-calculation won’t bring back the kind of returns that they had promised their shareholders. It’s a fairly surprising decision and not one a lot of analysts spotted,” Russell added.
Neither company answered email or phone enquiries into the collapse of the deal.
Mark Cutifani, chief executive of Anglo American, recently said that he had never witnessed such a hardly fought series of talks, and commented that both sides employed teams of veteran negotiators who were finding difficulty reaching common ground.
As Chinese coal stocks start to shrink, coking coal prices have jumped over 200 percent, although experts are in agreement that the current price range is totally unsustainable.
Due to the stellar performance of commodities in 2016, pressure on the Anglo American board to sell assets has subsided.
