Xstrata confirms Anglo merger approach

22nd Jun 2009 06:45

Swiss-based mining giant Xstrata has confirmed an approach to rival Anglo American over a possible merger, but so far has received a lukewarm response from the London-based, but South African dominated group.In a statement, Xstrata said a merger 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.Anglo American, however, only commented that any deal was "at a very preliminary stage and there is no certainty that any transaction will be forthcoming".Reports this morning also suggested that the Anglo board would attempt to persuade shareholders that they would be better off if it stayed independent, though the key determinant is said to be the attitude of its major investors.Anglo recently unveiled a major cost cutting programme and "does not see enough benefits" in buying or merging with Xstrata, according to the reports.But Xstrata's timing is canny say analysts. 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.