Anglo American leaps on Xstrata approach

22nd Jun 2009 12:15

Anglo American, the world's largest platinum miner, rallied as much as 12% Monday as Switzerland-based rival Xstrata made public a £41bn bid approach. But the proposed tie-up has received a lukewarm response from the London-based, but South African dominated Anglo. Investors sold off Xstrata.In a statement released after the market closed, Anglo said a merger 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".It called the strategic case for the combination "unattractive" for its shareholders and the terms "totally unacceptable".Earlier on, Xstrata said a tie-up was "highly compelling" and would provide "enhanced scale and financial flexibility to fund future growth"."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.Despite Anglo's opposition, analysts reckon Xstrata's timing is canny. Anglo's chief executive Cynthia Carroll has reportedly infuriated some large investors with her decision to cut the dividend earlier this year, while she has also attracted criticism over the prices paid for some recent acquisitions. No details on how any deal would be structured were released by Xstrata. At Friday's close it was valued at about £20bn and Anglo at just over £21bn.There were losses for Lonmin on fears that Anglo will be forced to sell its 24.9% stake in the platinum producer if gets into bed with Xstrata.Experts think the deal makes sense following the recent tie-up between BHP Billiton and Rio Tinto. BHP and Rio's combined iron ore operations at Pilbura, Western Australia will produce 270m tonnes of iron ore annually, making it the world's largest producer and saving $10bn a year.