HomeBase MetalsAnglo shareholders reject Xstrata merger plan

Anglo shareholders reject Xstrata merger plan

An Anglo-Xstrata merger
would create the world’s
biggest producer of
coal for power stations
London, England — MININGREVIEW.COM — 23 June 2009 – Shares in global mining and natural resources giant Anglo American plc – one of the world’s largest mining companies –  slid today after the mining group rejected a merger proposal from rival Xstrata – the fifth largest diversified metals and mining company in the world –  which some analysts said was unlikely to mount a hostile bid.

Reuters reports that Anglo shares, which gained 4.6% yesterday in the wake of Xstrata’s “merger of equals” plan, fell 3.7% to 1.635 pence shortly after today’s opening. Shares in Xstrata shed 1.1% to 627.9 pence, after falling 6.7% yesterday, compared with a 1.3 % fall in the British mining index.

Anglo snubbed Xstrata’s plan for a nil-premium merger just a day after it was unveiled on Sunday.

Analyst Michael Rawlinson at Liberum Capital said in a note it was a “thorough and humiliating slap in the face” from Anglo’s board. “The proposed transaction is on ice in our view as Xstrata are rightly unwilling (and unable?) to launch a premium hostile bid.”

Xstrata said in a statement late yesterday that it was disappointed about the rejection, but did not say if it would pursue a link-up. “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 from a merger,” it added.

Anglo said it rejected the approach because its assets were of much higher quality than Xstrata’s, and that the terms for a merger of equals were “totally unacceptable”. Top Anglo shareholders said they would only support a merger if they got a big premium to create a giant to compete in a consolidating mining sector.

A combination of the two groups would create the world’s biggest producer of zinc, platinum, coal for power stations and ferrochrome, as well as the No. 2 in coal for steelmaking and copper.