Xstrata pulls out of bid for its rival Anglo

MINER Xstrata pulled out of its bid to create a &ldquo;mining super-major&rdquo; with rival Anglo American yesterday, in a climbdown for its chief executive Mick Davis. <br /><br />The group decided not to make a formal offer for Anglo after the Takeover Panel issued a &ldquo;put up or shut up&rdquo; ruling. It proposed a nil-premium &ldquo;merger of equals&rdquo; to create a &pound;60bn mining giant that would have rivalled Rio Tinto and BHPBilliton.<br /><br />Anglo snubbed the original offer in June, saying it massively undervalued the company, and the arrival of new chairman Sir John Parker created further resistance to the offer.<br /><br />&ldquo;The Kraft/Cadbury talks were also a huge deciding factor in rejecting the bid,&rdquo; one industry source said. <br /><br />&ldquo;Shareholders saw a merger which would fundamentally change the company which was being bid for, and realised a premium should be paid for such a big merger&rdquo;.<br /><br />Analysts said Xstrata, which has $13.1bn (&pound;8.1bn) of debt, had insufficient funds to offer the premium of up to 30 per cent demanded by some Anglo shareholders.<br /><br />&nbsp;However, Xstrata said it would not rule out a future bid for Anglo. <br /><br />&ldquo;The compelling strategic rationale for a merger remains undiminished,&rdquo; said Davis, who grew Xstrata through a series of daring deals.<br /><br />Xstrata&rsquo;s withdrawn proposal for Anglo follows an unsuccessful offer for Lonmin &ndash; it dropped a $10bn cash bid last year amid the global downturn &ndash; and the failure of talks which could have seen a tie-up with Brazilian giant Vale.<br /><br />Anglo, meanwhile, under the leadership of Parker and chief executive Cynthia Carroll, will now seek to &ldquo;set out its value&rdquo; to its shareholders.<br /><br />Parker, who took office in August, is understood to have convinced several major Anglo shareholders that had been wavering on Xstrata&rsquo;s proposal to give Anglo more time to deliver its promised $2bn in cost cuts by 2011.<br /><br />&ldquo;The fact that Anglo&rsquo;s share price dipped just marginally on the news that the merger had been called off, shows how valuable the miner is in its own right,&rdquo;&nbsp; Edison&rsquo;s Charlie Gibson said.<br /><br />An Xstrata&ndash;Anglo tie-up would have created one of the biggest producers of zinc, platinum, coal and copper in the world.