Xstrata abandos Anglo bid, for now

16 Oct 2009

Xstrata AG yesterday withdrew its ambitious $68-billion proposed a merger with Anglo American to become one of the world's leading mining and natural resources companies, just  ... five days before the ''put-up, or shut-up'' deadline imposed by the UK Takeover Panel. (See: Anglo hopes to rid Xstrata's $68-billion merger bid by 20 October)

Acquisition specialist, Mick Davis, CEO of Xstrata, has however warned that his company will be keenly watching Anglo's performance for the next six months and he will be ''waiting in the wings'' since his company's interest remains ''undiminished.''

For the Anglo board, Xstrata's announcement has come as a relief, but will put extreme pressure on its chief executive officer Cynthia Carroll to force the miner to  perform even better and address the various problems at the company, newly appointed chairman Sir John Parker's backing she enjoys.

When Xstrata proposed the "merger of equals" in June, (See: Xstrata proposes $68 billion merger deal with Anglo American)  the board of Anglo promptly rejected it, saying, ''A combination with Xstrata would profoundly impact the nature of the company's portfolio by significantly diluting its lucrative platinum, iron ore and diamond markets while increasing exposure to nickel and zinc'' (See: Anglo American rejects Xstrata's $68-billion deal).

Xstrata had then said that the merger would bring in savings of $1 billion annually and would be better placed to compete with larger rivals like Anglo Australian miners BHP Billiton and Rio Tinto and Brazilian iron ore giant Companhia Vale do Rio Doce SA.

In a company release put out yesterday, Davis says, ''It is regrettable that the board of Anglo American immediately rejected our approach, without engaging with Xstrata to investigate the potential to create more value than either company could alone.''