London-listed Xstrata Plc, the largest exporter of coal used by power plants, has proposed a “merger of equals” with Anglo American Plc to gain access to iron ore mines and control of the world’s biggest platinum producer.
Xstrata pressed the directors of Anglo American Plc to enter into negotiations over its proposed 24 billion-pound ($39 billion) merger, saying talks would be in the interests of both companies’ shareholders. The plan, rejected by Anglo as “totally unacceptable” on June 22, would save more than $1 billion annually by the third full year after a deal, Zug, Switzerland-based Xstrata said in a statement. Anglo this year accelerated a plan to cut costs by $2 billion a year by 2011 after suspending dividends for the first time since the outbreak of World War II as metals slumped. See http://www.bloomberg.com/apps/news?pid=newsarchive&sid=algSMB2904z0.
According to Bloomberg, the bid may spur competing bids from Brazil and China as rival miners vie for a deal to place them among the largest producers. The Xstrata merger is the largest proposed transaction since BHP Billiton Ltd., the industry’s biggest company, abandoned its hostile bid for Rio Tinto Group in November 2008. Analysts and investors say Brazil’s Vale SA, the biggest iron ore producer, and state-owned Aluminum Corp. of China may also consider acquisitions.
Xstrata and Anglo are the last remaining diversified mining groups that would allow an acquirer to compete with BHP, Rio and Vale through a single acquisition. Mining executives and investors are seeking further consolidation in the industry, creating conglomerates that can make economies of scale and be better able to influence commodity prices.
See http://www.bloomberg.com/apps/news?pid=newsarchive&sid=avYtjjjqHTaI