Xstrata Scraps Anglo-American Bid

Swiss mining company Xstrata is walking away from its takeover attempt of mining company Anglo-American. In June, Xstrata made a merger overture to Anglo American, which the company summarily rejected.

Xstrata claimed the merger would be a union of equals, however, Anglo American dismissed the approach as "totally unacceptable" and "lacking strategic merit."

Anglo-American owns a 45 percent stake of De Beers.

Early in October, Xstrata was ordered by the United Kingdom Takeover Panel to make an official offer for Anglo American by October 20th. Xstrata now announced that it has "no intention" of making an offer. As result, it is barred for six months from making any further takeover bids, though the company said it reserves the right to participate in a third-party bid for Anglo-American.

Xstrata's CEO Mick Davis said the company would "assess a range of alternative growth options" instead.

"It is regrettable that [Anglo] immediately rejected our approach, without engaging with Xstrata to investigate the potential to create more value than either company could do alone," Davis argued.

Davis reiterated his belief that a merger would benefit both companies. "The compelling strategic rationale for a merger remains undiminished." Case in point, a merger would result in savings of $1 billion a year after three years.

"Cost savings measures by either company alone simply cannot realize this value, nor deliver the associated strategic benefits," he added.

Had the two companies combined, the proposed combination would create a conglomerate worth $68 billion, ranking the combined company behind BHP Billiton and Rio Tinto.

Earlier this year, Rio Tinto and BHP Billiton agreed on a joint venture after Rio Tinto walked away from a planned tie-up with Chinalco, China’s largest diversified mining company which is government-owned.