Xstrata sticks by merger plan

City A.M. Reporter
MINING group Xstrata remains committed to a nil-premium merger with Anglo American, the company said yesterday after a newspaper claimed the company would offer a &pound;5bn sweetener to seal the deal. <br /><br />Xstrata is understood to be looking to raise the money via a rights issue because its debt-laden balance sheet had made it difficult to justify further borrowings.<br /><br />But Xstrata said in a statement that its proposal &ldquo;remains a nil-premium merger of equals, in which both companies&rsquo; shareholders will share equally the substantial benefits that are uniquely available from a merger&rdquo;.<br /><br />The statement added: &ldquo;The proposal bears none of the characteristics of a takeover, in which a premium would typically be payable.&rdquo;<br /><br />Anglo&rsquo;s shareholders are in favour of a merger deal in principle but want better terms than the nil-premium, all-share merger that Xstrata proposed in June.<br /><br />Xstrata is also believed to be willing to consider taking a smaller stake in the enlarged company.<br /><br />Xstrata has been mulling its options after Anglo last month rejected proposals for a merger that would have created a mining giant valued at more than &pound;40bn.<br /><br />Anglo last week appointed veteran industrialist Sir John Parker &ndash; the 67-year-old chairman of utilities giant National Grid &ndash; as chairman. <br /><br />He will replace Sir Mark Moody Stewart, who is retiring, and is expected to help bolster the group&rsquo;s leadership as it seeks to fend off the unwanted Xstrata approach.<br /><br />Anglo&rsquo;s decision to opt for an established UK industrialist for the top role comes at a time of weakness &ndash; it has underperformed rivals during the recent commodities boom.