SWITZERLAND and SOUTH AFRICA — Rumours were confirmed this week, when Xstrata, the Swiss mining giant, said it had proposed a “merger of equals” with South Africa’s Anglo American. The June 17 proposal is for an all-share deal that would see shareholders of each former company holding 50% of the new company.
The Anglo board rebuffed the preliminary proposal, saying that it would “profoundly impact” the company by diluting its exposure to platinum, iron ore and diamonds while increasing its exposure to nickel and zinc. “The terms proposed by Xstrata were totally unacceptable,” the directors said in a statement.
For its part, Xstrata says size matters. The combined company would have had 2008 revenues of US$54.3 billion. Further, synergies of at least US$1 billion per year would be realized by the new company.
As for Xstrata’s claim that this would be a merger of equals, a few simple comparisons might be made. Revenues during 2008 at both companies were about the same (Xstrata US$27 billion and Anglo US$26 billion). Of those amounts, Xstrata had retained earnings of US$5 billion and Anglo had $6 billion. However, the assets column shows considerable size difference. Xstrata values its assets at US$15 billion, while Anglo counts $50 billion in assets.
Watch for a long, hotly contested battle. Follow it at either www.AngloAmerican.com or www.Xstrata.com.