xstrata anglo merger

Just thought I'd ask if anybody had any opinions on the likely consequences (good or bad) to NKP should such a merger go ahead. My thoughts are that it should not effect NKP much, but there may be a bit of uncertainty for a while if the merger takes place (article below)

source: http://www.theaustralian.news.com.au/business/story/0,28124,25634623-36418,00.html

XSTRATA boss Mick Davis is coming under pressure from Black Rock and Capital Group, the two US fund managers that are among his biggest shareholders, to engineer a merger with rival mining giant Anglo American.

Mr Davis has been keen on a deal for some time, but all approaches have been rebuffed by Cynthia Carroll, his opposite number at Anglo.

The investors have renewed their campaign in the wake of last week's tie-up between BHP Billiton and Rio Tinto. If they win regulatory approval, the pair plan to unite their iron ore businesses, creating a group with the lion's share of the raw materials needed by Asia's steel mills.

An Xstrata-Anglo merger would create a group that could compete at a global level with Rio and BHP, and Brazilian miner Vale. The combination would also unlock significant value for shareholders, with analysts at Nomura suggesting that savings of $US700 million ($860m) a year could be achieved.

Anglo and Xstrata shares closed at pound stg. 17.29 and 760p respectively last week, for similar stockmarket values of pound stg. 22.7 billion and pound stg. 22.3bn. They also trade on similar ratings, with Anglo on a price-earnings ratio of 6.6 and Xstrata at 5.9.

Industry bankers say Anglo's co-operation would have to be secured for a merger to go ahead. However, not only would Anglo's board be expected to fight a tie-up but the government of South Africa -- where Anglo has many of its largest operations -- might exert pressure to keep it independent.

City investors are concerned, though, that Anglo has yet to find a chairman to replace Mark Moody-Stuart. John Parker, chairman of National Grid, is being talked of as a possible candidate.

An industry insider said: "If they can find the right chairman, they might be able to see off this merger pressure."

For Mr Davis to be successful in his talks with Ms Carroll this time, he would need to have the support of a number of big Anglo investors. Ms Carroll believes Anglo is significantly better financed than Xstrata and that she can generate greater returns for her investors as a stand-alone company.