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BHP will not relent on structure, value of $49 billion Anglo offer, say sources

By Melanie Burton and Scott Murdoch

PERTH/HONG KONG (Reuters) -BHP will stand firm on the structure and value of its latest takeover proposal for Anglo American, focusing instead on allaying its target's concerns around execution risks over the coming week, sources said on Thursday.

The world's biggest listed mining group now has until May 29 to make a firm bid for Anglo American or it will be forced to walk away for at least six months under the UK's takeover rules after it was granted a one-week extension on Wednesday.

Two sources who have been in talks with the miner and its advisers said they expect BHP management will spend the next week properly understanding Anglo's concerns on an asset-by-asset basis with a goal to convince it on the merits of the deal.

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Baden Moore, analyst at broker CLSA in Sydney, said BHP's goal will be to get Anglo American to agree to open its books and allow a further extension.

"They are gradually, gradually getting closer to a deal," he said.

Anglo chairman Stuart Chambers highlighted concerns on Wednesday about completion and execution risks in BHP's proposal, meaning the structure of any deal and the fate of Anglo's businesses in South Africa remain big obstacles.

One solution that BHP has already offered is to foot the bill to demerge Kumba Iron Ore which is expected to net the South African government $2 billion of much needed capital gains tax, according to a pre-due-diligence BHP estimate, said one of the sources.

Last week, Anglo announced plans to either spin-off or sell its less profitable nickel, diamond and platinum businesses to refocus on copper, and to also sell its coal businesses.

In that plan Anglo would need to bear those substantial spin-out costs itself, which would ultimately be borne by its shareholders.

If the deal does not go ahead, Anglo boss Duncan Wanblad will be under pressure to get top dollar for its diamonds business in particular and ensure its demergers proceed without any hiccups, two investors said. One foot wrong and BHP will be ready to pounce, they said.

"Anglo does not exist in a year's time, one way or the other, in my mind," one of the investors said.

BHP and Anglo are having joint meetings with UK and Australian regulators this week, a separate source told Reuters.

BHP's latest 29.34 pounds per share approach, based on undisturbed share prices at market close on April 23, valued London-listed Anglo at 38.6 billion pounds (about $49.1 billion). The offer was still conditional on Anglo unbundling its platinum and iron ore assets in South Africa.

The May 29 deadline coincides with general elections in South Africa, where Anglo was formed and is still of significant national importance.

Shares of BHP fell 3.8% to A$44.47 on Thursday.

Anglo's shares closed up 0.4% at 26.98 pounds on the London bourse on Wednesday.

($1 = 0.7864 pounds)

(Editing by Editing by Muralikumar Anantharaman)