Mining group Anglo American has strongly rejected the merger plan put forward by Xstrata, saying that the proposal is "totally unacceptable" and not in the interest of Anglo American shareholders.
"The Board has concluded that a combination with Xstrata would profoundly impact the nature of the Group’s portfolio by significantly diluting Anglo American’s unique exposure to the structurally attractive platinum, iron ore and diamond markets while increasing exposure to nickel and zinc," Anglo said in a statement.
Xstrata had sent a written proposal to the Board of Anglo American seeking their consideration of a merger of equals of the two companies, thought to be worth about $68B, saying it believed a merger of the two "world-class companies with complementary assets" was "highly compelling."
"The combination would create a premier portfolio of operations diversified across multiple commodities and geographies, with enhanced scale and financial flexibility to fund future growth," Xstrata said in a statement, adding that it has already quantified substantial operational synergies from the combination that are not available to either company operating alone.
Market observers are speculating as to whether Xstrata will now take its proposal directly to Anglo's shareholders, in the hope that they will put pressure on Anglo's board to discuss the deal.
Xstrata has said that it is disappointed by Anglo American's rapid rejection of its proposal. "We are disappointed that the Anglo American board has not seen fit to discuss our proposal in view of the substantial value for both companies' shareholders that would arise uniquely from a merger of the two companies."
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