Put up or shut up

[miningmx.com] — XSTRATA CEO Mick Davis has so far in his approach to Anglo American followed the doctrine voiced by Winston Churchill of “jaw jaw’ rather than “war war’ but it remains to be seen how long he can get away with this.

There is an obvious riposte to make Davis “put up or shut up’ and it should be a question of when Anglo will resort to it rather than if it will.

That is to use Rule 2.5 of the UK Takeover Code to force Xstrata to announce a firm intention to make an offer for Anglo American or, instead, announce that it does not intend to make such an offer.

If Xstrata states it does not intend to make an offer then it will be bound by the restrictions contained in Rule 2.8 of the UK Takeover Code for six months from the date of the announcement.

That is what Rio Tinto did to BHP Billiton in December 2007 after BHP Billiton CEO Marius Kloppers had publicly declared his interest in merging with Rio Tinto.

One of the key reasons why Anglo should follow this course of action has been voiced by chairman elect John Parker who will take over from current chairman Mark Moody-Stuart on August 1.

In an interview posted on Anglo’s website Parker described Xstrata’s approach as a “great distraction for management.’

He commented, ” I want to see them (Anglo management) focussed on wringing out the value that’s inherent in this business and I’m very confident that they have plans to do so.’

Precisely. Having Xstrata sounding off in public and, no doubt, in private to key shareholders about just how much better Anglo could be managed in their hands is not going to do anything for morale at Anglo.

Nobody likes uncertainty on this scale and that was the key reason cited by Rio Tinto when it invoked the code against BHP Billiton declaring “it is in the interests of the group and its shareholders that this period of uncertainty is brought to an end.’

Anglo spokesperson James Wyatt-Tilby declined to comment when asked whether Anglo intended invoking the Takeover Code regulations against Xstrata.

According to one analyst a possible reason for Anglo delaying taking such action might be that they want Parker in place and fully up to speed before they escalate the situation.

According to the analyst a “put up or shut up’ move by Anglo would call Davis’ hand on his “merger of equals’ proposal.

“There is zero chance that Xstrata is going to get away with a no premium offer for Anglo. Davis is going to have to come up with something more innovative than that,’ the analyst comments.

Of course, forcing Xstrata to make a formal offer could be the spark that finally triggers a bidding war for Anglo forcing the other parties that are rumoured to be interested to take action themselves.