Monday June 22, 07:09 PM
Miner Anglo American rejects Xstrata merger bid
LONDON (AFP) - London-based mining group Anglo American (LSE: AAL.L - news) rejected a merger bid by its Swiss rival Xstrata (LSE: XTA.L - news) on Monday, snubbing a move that could have forged the two into one of the world's biggest miners.
"The strategic case for the combination is unattractive for Anglo American shareholders," Anglo American said in a statement. "Irrespective of this lack of strategic merit, the terms proposed by Xstrata were totally unacceptable."
The potential tie-up between Xstrata and British-South African firm Anglo American was the latest sign of consolidation pressure in the sector after the collapse of a deal by Rio Tinto (LSE: RIO.L - news) with China.
The price of Anglo American shares had soared to close 4.62 percent higher in London trading on Monday after Xstrata said at the weekend that it had approached its rival about a merger.
Anglo American is worth 35 billion US dollars (25 billion euros) and Xstrata 33 billion dollars.
A merger could have created a company worth more than Rio Tinto, which earlier this month cancelled a controversial tie-up with China's Chinalco in favour of a joint venture with the world's biggest miner BHP Billiton (LSE: BLT.L - news) .
On Sunday, Xstrata had said it was seeking a possible "merger of equals," adding that such a move would be "highly compelling" and "significantly enhance shareholder returns."
The activities of the two companies overlap in many areas. Both own coal assets in Australia and South Africa and there had been potential for savings across their copper mining operations.
But Anglo American said in its statement that "a combination with Xstrata would profoundly impact the nature of the Group's portfolio."
A merger risked "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 company said.
Anglo American is cutting 19,000 jobs this year after posting a 29-percent fall in 2008 net earnings because of sliding demand for raw materials amid the world's worst economic downturn since the 1930s.
The group has also come in for much criticism from shareholders after chief executive Cynthia Carroll decided against paying a dividend for 2008.
Carroll, who has headed the Anglo-South African firm since March 2007, has also reduced Anglo American's 2009 investment programme by half to 4.5 billion US dollars because of global economic uncertainty.
Earlier this month, Rio Tinto decided against allowing Chinese state-owned aluminium giant Chinalco to invest 19.5 billion dollars in the Anglo-Australian firm.
Rio has been searching for extra funds after its purchase last year of Canadian aluminium group Alcan (AL.TO - news) , which saddled the company with some 38 billion dollars of debt.
But Chinalco's emergence as a suitor sparked a political firestorm over ownership of Australian assets, leaving the Australian government with a difficult choice -- to risk angering either its electorate or China, a key market.
Instead, Rio unveiled an iron ore joint venture with BHP Billiton and a rights issue worth 15.2 billion US dollars. BHP meanwhile abandoned a hostile takeover bid for Rio last November.
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