Mining group merger move

Huddersfield Daily Examiner (Huddersfield, England), June 23, 2009

MINING giant Xstrata has confirmed it is seeking a "merger of equals" with FTSE 100 Index rival Anglo American.

Xstrata described the tie-up - worth pounds 42bn at current prices - as highly compelling given the pair's interests in multiple commodities and regions.

The Swiss-based firm said it was hoping for talks with the board of Anglo American regarding the proposal, which was tabled late last week.

Anglo shares rose by 75p to pounds 16.98 yesterday, even though a statement from the company gave no indication about whether it will pursue the approach.

The company said: "It should be noted that this situation is at a very preliminary stage and that there is no certainty that any transaction will be forthcoming. A further announcement will be made if and when appropriate." Reports suggested Anglo was dubious about a full-blown merger, having resisted the advances of Xstrata on previous occasions.

There is considerable overlap between the two companies, with both owning coal assets in Australia and South Africa, suggesting big cost savings would be available to the merged group.

There would also be potential savings across their copper mining operations.

Japanese investment bank Nomura has estimated a potential merger could achieve cost savings of pounds 424.5m a year, newspaper reports said.

The move comes just nine months after Xstrata axed its pounds 5bn bid for rival Lonmin due to turmoil in global credit markets.

The Anglo-Swiss firm, which made an indicative offer of pounds 33 per share in August, said the deal involved a refinancing of debt, which would not be in its interests.

Anglo American has endured a turbulent few months, announcing in February that it planned to shed 19,000 jobs this year in a bid to cut costs in the face of weaker global demand..