views

Xstrata looks to woo Anglo shareholders

MINER Xstrata went public with the details of its offer for rival Anglo American yesterday, in an effort to convince shareholders of the merits of the deal.<br /><br />Releasing a letter sent to Anglo, Xstrata chief executive Mick Davis said a merger could bring in annual cost reductions of more than $1bn (&pound;609m) by the third year of a merger.<br /><br />Davis added: &ldquo;It is well recognised that the combination of Xstrata and Anglo American is a natural fit and the most compelling major transaction available in our industry.&rdquo;<br /><br />In the first two years, the Xstrata letter added, one-time costs connected with the merger of not more than $500m would be incurred.<br /><br />&ldquo;Anglo investors have a right to the details,&rdquo; an Xstrata spokesman said. &ldquo;We&rsquo;re hoping shareholders will apply pressure on Anglo for talks with us,&rdquo; he added.<br /><br />London-listed Anglo, led by chief executive Cynthia Carroll, rejected merger talks earlier this week, saying the terms of the deal were &ldquo;totally unacceptable&rdquo;.<br /><br />Xstrata had said it was disappointed that Anglo wasn&rsquo;t even willing to talk, especially as &ldquo;industry consensus is that a merger makes sense.&rdquo;<br /><br />&ldquo;We will continue to seek to engage with Anglo American&rsquo;s board and management to investigate the value that would accrue to their shareholders and ours from a combination,&rdquo; Xstrata said.<br /><br />A merger of Xstrata, which has a market cap of &pound;20bn, and Anglo, which is worth &pound;21.3bn, would create a mining giant bigger than Rio Tinto, the second largest player in the industry behind BHP Billiton.<br /><br />Anglo would not comment on the approach last night, but a heavyweight investor rallied behind the miner in its defence. <br /><br />&ldquo;We fully support its rejection of Xstrata&rsquo;s proposal,&nbsp;as&nbsp;we see little financial or strategic merit for it,&rdquo; Aviva said.<br /><br />However, Harbor International Fund, which holds shares in both firms, has said the merger would be &ldquo;a good idea&rdquo;