Morning:
8°c
The blockbuster mining merger that never quite happened was finally called off today as ultra-acquisitive Xstrata removed its tanks from the lawn of Anglo American.
In what will be seen as a major victory for Sir John Parker, the veteran British boardroom fixer who was brought in as chairman of Anglo after Xstrata first attempted to move on its fellow mining giant, Xstrata abandoned its plans for a £56 billion nil-premium merger.
When Parker was brought in he immediately steadied a wobbling Anglo ship and backed chief executive Cynthia Carroll's bold move to not only rebuff Xstrata boss Mick Davis's advances but also refuse to speak to him outright. Before Parker's arrival Carroll's job was on the line amid a City whispering campaign that she was not up to it.
The deal would have changed the face of the mining industry and set up a merged Anglo-Xstrata as a viable rival to the industry heavyweights of BHP Billiton and Rio Tinto, Vale of Brazil and the burgeoning Chinese giants.
In a statement today, Davis said: “My letter to the board of Anglo American [in June] was intended to commence confidential discussions to explore the potential to merge Xstrata and Anglo American and create a new mining super-major with the scale and diversity to compete in the evolving global mining sector.
“It is regrettable that the board of Anglo American immediately rejected our approach, without engaging with Xstrata to investigate the potential to create more value than either company could alone.”
Davis, the king of the mining industry takeover, had found himself boxed in to a corner after Anglo had secured from the Takeover Panel a put up-or-shut up deadline of Tuesday 20 October for Xstrata to make a formal offer.Though Xstrata is now formally banned from making a bid for the next six months, Davis pointedly signalled he is playing a longer game and may yet be back for Anglo.
“The compelling strategic rationale for a merger of the two companies remains undiminished and has been recognised by shareholders of both companies,” said Davis.
“A merger would deliver over $1 billion of quantified pre-tax synergies per annum by the third full year following completion, together with superior competitive positioning, scale and diversity. Cost-savings measures by either company alone, while commendable, simply cannot realise this value, nor deliver the associated strategic benefits. Our decision not to proceed with an offer before the deadline imposed by the UK Takeover Panel reflects our disciplined approach to growth and our focus on the value proposition for Xstrata's shareholders in a merger. We continue to assess a range of alternative growth options, in full recognition that transactions of this nature often take time and patience to mature.”
Xstrata's decision to walk away will fill the bonus coffers of Karen Cook of Goldman Sachs, a rising star of the takeover business, who helped defend Anglo.
