Xstrata jilted by 'hasty' rejection

I-Net Bridge | Tue, 23 Jun 2009 07:24
[miningmx.com] -- Global diversified miner Xstrata on Tuesday expressed disappointment at the haste with which Anglo American has rejected its all-share merger proposal.

In a strongly worded rejection, Anglo American said late on Monday night that the terms proposed by Xstrata “were totally unacceptable”.

News of a possible tie-up between the two mining giants was confirmed on Sunday when both companies acknowledged that Xstrata had approached Anglo about a “merger of equals”.

While both companies have similar market capitalisations, and even similar ambitions at least in terms of growing platinum assets, many said such a deal could be problematic because of the difference in corporate cultures.

Anglo American said in a statement that its board had concluded that a combination with Xstrata “would profoundly impact the nature of the group's portfolio by significantly diluting Anglo American's unique exposure to the structurally attractive platinum, iron ore and diamond markets while increasing exposure to nickel and zinc.”

The resources group said in reaching its view the board had also considered the “comparative quality and life of the producing assets and the growth to be delivered from the respective project portfolios of the two companies.”

It said the strategic case for the combination was “unattractive” for Anglo American shareholders.

Xstrata in the meantime said it was also surprised that Anglo American was unwilling to even start talks.

“We are also surprised that the Anglo American board has not seen fit to engage with Xstrata to discuss our proposal in view of the substantial value for both companies' shareholders that would arise uniquely from a merger of the two companies,” Xstrata said in a statement.

Analysts predicted as early as Monday that the deal was unlikely to make it through.

The proposed merger would have created a group with a combined market capitalisation of US$68 billion and a global leader in base metals, the world's largest producer of platinum, thermal coal and ferrochrome and zinc, and top-five in copper, nickel, coking coal and iron ore.

Anglo American's 45% stake in diamond giant De Beers also secures a leading position in diamonds.

South Africa's mining ministry also said it was concerned about the implications of a tie-up between the mining giants.

"At face value, (a merger) does raise concerns about competition in the industry and other serious issues," said Jeremy Michaels, spokesman for the Department of Mineral Resources.

Shares in Anglo American closed 4.27% or 9.25 rand firmer at 226.10 rand on the JSE on Monday.