MINERS PLOT A 40BN MERGER
COAL miner Xstrata is eying up Anglo American – owner of the world’s biggest platinum producer – for a £41bn marriage, Morning Wire can confirm.
A tie-up between the two titans would create one of the world’s leading natural resources companies, and comes as a wave of consolidations sweeps over the mining industry.
Xstrata is seeking a “merger of equals,” it said yesterday, without giving further details. Its market capitalisation is £20bn, while Anglo is valued at £21.3bn. The mining group’s chief executive Mick Davies wrote to Anglo’s board last week, proposing tie-up talks.
“A merger of these two world-class companies with complementary assets is highly compelling,” Xstrata said yesterday. Anglo, whose major shareholder is the South African government, confirmed yesterday it had received a “preliminary” takeover approach. JP Morgan Cazenove and Deutsche Bank are advising Xstrata, while Goldman Sachs and UBS are advising Anglo.
Switzerland-based Xstrata has seen Anglo as an attractive partner for several years, but talks of a marriage have resurfaced recently in the wake of recent deal between bigger rivals BHP Billiton and Rio Tinto.
It is understood that Xstrata’s 35 per cent shareholder Glencore, a commodities company, has given the tie-up the green light.
Analysts say that the cost-cutting benefits mean the deal makes sense. But it is understood that Anglo, headed by embattled Cynthia Carroll, is cautious of the deal.
“Cynthia Carroll is under the cosh having made expensive acquisitions and many fund managers would like to see her go,” said BGC Partners’ David Buik. “This might be the opportunity for their wishes to come true,” he added.
Nomura analyst Paul Cliff has said that a merger could result in cost synergies of $700m per year, or 2 per cent of combined operating costs.
Miners worldwide are seeking to consolidate as they struggle against debt and surplus capacity in the downturn. Mergers allow the companies to cost-cut.