Anglo American confirms Xstrata merger approach

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Swiss mining company seeks merger with London-based Anglo American to cut costs.

London -- Anglo American, the London-based mining giant, on Monday confirmed receiving a merger approach from Swiss rival Xstrata that could lead to the creation of one of the world's biggest miners.

Xstrata on Sunday said it had made an approach to Anglo American but did not provide any figures.

According to a report in London's Sunday Telegraph, Xstrata's chief executive Mick Davis wrote to the Anglo American board in mid-June to begin discussing a possible GBP 41 billion (CHF 73 billion, EUR 49 billion, USD 68 billion) deal.

Anglo American on Monday responded to the press report and Xstrata's statement with a short comment of its own.

"The Board of Anglo American confirms that it has received a preliminary proposal from Xstrata Plc which may or may not lead to a transaction involving the Group," it 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 statement added.

Xstrata said it was seeking a possible "merger of equals," adding that such a move would be "highly compelling" and ultimately "significantly enhance shareholder returns.

"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," it added.

Investment banks Goldman Sachs and UBS are believed to be advising Anglo, while Xstrata is being advised by Deutsche Bank and JP Morgan Cazenove.

The activities of the two companies overlap in many areas. Both own coal assets in Australia and South Africa, which suggests a merged group could make big cost savings.

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

Japanese investment bank Nomura estimated a potential merger could achieve cost savings of USD 700 million a year, the Telegraph said.

AFP / Expatica

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