Xstrata proposes `merger of equals' as Anglo dumps $68 billion deal

Swiss mining giant Xstrata has proposed a "merger of equals" after Anglo American rejected its $68 billion deal for a merger of the two (See: Xstrata proposes $68 billion merger deal with Anglo American) by saying that the merger deal terms were "unattractive" and the proposal on the whole was, "totally unacceptable."

Xstrata sent a proposal to Anglo projecting the likely savings and growth prospects from a merger of the two groups.

"Xstrata plc notes the announcement made by Anglo American plc today. Xstrata confirms that it recently sent a written proposal to the board of Anglo American seeking their consideration of a merger of equals of the two companies," the company said in its fresh proposal.

"Xstrata believes a merger of these two world-class companies with complementary assets is highly compelling.  The combination would create a premier portfolio of operations diversified across multiple commodities and geographies, with enhanced scale and financial flexibility to fund future growth", it said.

"Xstrata has already quantified substantial operational synergies from the combination that are not available to either company operating alone. In addition, Xstrata believes the optimisation and reprioritisation of the combined company's organic growth pipelines would significantly enhance shareholder returns," it added.

Xstrata said it "is seeking to engage with the board of Anglo American regarding a merger of equals that would realise significant value for both companies' shareholders. There is, however, no assurance that any transaction will be forthcoming from Xstrata's proposal."

The company said it would make further announcements, if necessary, if and when appropriate.

Xstrata also reserved the right to vary the terms of the merger proposal that may ultimately be made for or involving Anglo American.

The Xtrata-Anglo row could draw more players onto the scene, and industry watchers see Brazilian giant Vale as a potential bidder for either party.

Vale, last year, made an unsuccessful attempt to merger with Xstrata to form the world's biggest mining company.