Anglo American Rejects Xstrata’s Merger Bid as Unattractive and Unacceptable

The board of multi-commodity miner Anglo American Plc has rejected Xstrata Plc’s “merger of equals” offer, saying the offer was “unattractive” and “unacceptable.” Anglo said the merger would profoundly impact the nature of the group’s portfolio by significantly diluting its unique exposure to the structurally attractive platinum, iron ore and diamond markets while increasing exposure to nickel and zinc.

Anglo said in an announcement that the board has also had “particular regard to the comparative quality and life of the producing assets” held by Xstrata. Further, Anglo did not express much belief in the growth prospects to be gained from combining the two companies’ project portfolios.

“The board has therefore concluded that the strategic case for the combination is unattractive for Anglo American shareholders. Irrespective of this lack of strategic merit, the terms proposed by Xstrata were totally unacceptable.”

Xstrata announced earlier this week that it has proposed a merger with Anglo, 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.”

Anglo, saying that it regularly reviewed its strategic alternatives, including the rationale for a combination with Xstrata, as a way of progressing Anglo American’s objectives, believes that the integrated approach to asset optimization and procurement that it has implemented will deliver substantial cost savings for Anglo’s shareholders.