Xstrata Confirms Anglo American Merger Proposal

Confirming earlier reports, Xstrata Plc has proposed a “merger of equals” with Anglo American Plc, the parent company of De Beers. Multi-commodity miner Xstrata, the world’s largest exporter of coal, said the combination would create a premier portfolio of operations diversified across multiple commodities and geographies.

“Xstrata believes a merger of these two world-class companies with complementary assets is highly compelling.” According to reports, Xstrata is interested in particular in increasing its access to iron ore mines as well as control of the world’s biggest platinum producer.

The Swiss miner noted that the combined companies would create “enhanced scale and financial flexibility to fund future growth.”

Xstrata said in a release that it has already quantified substantial operational synergies from the combination that are not available to either company operating alone. In addition, Xstrata believes the optimization and reprioritization of the combined company’s organic growth pipelines would significantly enhance shareholder returns.

According to Bloomberg, Xstrata Chief Executive Officer Mick Davis wants to combine with Anglo to make cost savings from joining operations and continue an acquisition spree in which the company has spent more than $28 billion in the past six years on nickel, copper, coal and platinum assets. A combination would create a company with a market value of about 41 billion pounds ($68 billion).

According to Anglo American, talks are at a “very” preliminary stage.

Anglo American Chief Executive Officer Cynthia Carroll has been under fire recently, with large investor criticizing her achievements, threatening to sell their holdings in the company. It is the worst-performing stock this year in the 14-member FTSE 350 Mining Index, which has gained 33 percent.