Anglo American, which owns a majority stake in the world-famous De Beers diamond company, said its board was reviewing the approach from BHP.
BHP said the deal would boost its presence in the copper market, which is seeing demand soar amid the shift towards clean energy, as well as giving it greater access to potash, and coking coal in Australia. Copper is particularly sought after as the metal is used widely in electric vehicles, batteries and charging stations.
Anglo, which has big copper plants in Chile and Peru, said that under the deal being proposed by BHP, it would have to spin off two units — its platinum arm, Anglo American Platinum, and Kumba Iron Ore, which are both listed in South Africa.
BHP added that following any deal, Anglo’s other “high quality operations, including its diamond business” would be subject to a strategic review.
“The combination would bring together the strengths of BHP and Anglo American in an optimal structure," it said.
Under U.K. takeover rules, BHP has until May 22 to make a formal offer.
"The deal would represent the biggest shakeup of the global mining industry in more than a decade,” said James Whiteside, metals and mining corporate research director at Wood Mackenzie in London.
However, he said other companies may look to buy Anglo American themselves, especially if the company's shareholders hold out for a higher price.
The prospective deal, Whiteside added, “is all about copper.”