ANGLO AMERICAN, led by chief executuve Cynthia Carroll, snubbed rival miner Xstrata’s takeover approach last night, calling its rival’s terms “totally unacceptable”.
Anglo said Xstrata’s £40bn plus merger proposal was “unattractive” and would hurt its interests in the platinum, iron ore and diamond markets. Xstrata has strong coal and copper interests.
Anglo added that its current business strategy of cutbacks on investment would make “substantial savings”.
Xstrata, led by chief executive Mick Davis, expressed disappointment at Anglo’s “rapid rejection” of its all-share “merger of equals”.
Xstrata claimed its proposal to merge “two world-class companies” was “highly compelling”.
It was last night unclear whether Xstrata would sweeten the terms of its approach for Anglo, and analysts remained divided on whether a deal would be possible following the rejection.
Industry observers suggest a merger would make sense because of the vast cost savings that could be made.
“Anglo is just lifting a skirt and showing an ankle,” Seven Investment Management’s Justin Urquhart-Stewart said last night. “By rebuffing Xstrata, Anglo will now look far more attractive. This is the mining equivalent of ‘ding dong’,” he added.
Others doubt Xstrata is strong enough to woo Anglo, as it has already raised £4.1bn through a rights issue and has a substantial debt pile.
The proposed marriage between the two titans comes after a joint venture between mining giants Rio Tinto and BHP Billiton.
Miners all around the world are seeking to cost-cut through consolidation, as they battle against debt and surplus capacity in the economic downturn.
Anglo’s chief executive Cynthia Carroll is under fire from shareholders who say she has made unnecessary expensive acquisitions.
Xstrata boss Mick Davis has a fierce reputation as a deal maker, and some analysts have indicated he would be good for Anglo.
It is understood that Harbor International Fund, an investor in both Anglo and Xstrata, supports Davis in his desire for Anglo. A merger would be “a good idea,” it said.
It is not the first time Xstrata and Anglo have talked: in late 2007 Davis sounded out Anglo as a potential buyer for Xstrata, but a deal was never cut.