xstrata ceo no plans to revive anglo offer

By Jesse Riseborough - Aug 3, 2010 9:25 PM GMT+0930 Tue Aug 03 11:55:39 UTC 2010

*
* Email
* Share
o Business Exchange
o Twitter
o Delicious
o Digg
o Facebook
o LinkedIn
o Newsvine
o Propeller
o Yahoo! Buzz
* Print

Xstrata Plc, with plans to invest $14 billion in new mines by 2014, has no immediate plans to revive an offer for Anglo American Plc even as it reviews merger and acquisition opportunities to bolster growth.

The Anglo proposal was a good opportunity at the time, its a good combination, Chief Executive Officer Mick Davis said by telephone from London today. They showed no interest and we are not currently focusing in on that as an option.

Xstrata, the biggest exporter of power station coal, ended a proposed merger of equals with Anglo in October. Since then Anglos market value is up 19 percent at 34.4 billion pounds ($55 billion). Xstratas $14 billion mine investment plan will boost output by 50 percent to take advantage of anticipated growth in demand for raw materials in China, Brazil and India.

They have got the firepower and the balance sheet to look at something meaningful, London-based UBS AG analyst Olivia Ker said today by phone. You need to be able to come up with more synergies to be able to do it and I think you need to be a bigger entity to be able to look at Anglo again to make it work. At current prices the valuations dont make sense.

Xstrata rose 0.4 percent to 1,079 pence by 12:39 p.m. in London. It today reported first-half profit more than tripled to $2.3 billion, beating analyst estimates. The company reduced net debt to $8.4 billion and gearing to 19 percent by the end of June. Anglo fell 0.7 percent to 2,608 pence.

Glencore Merger

Xstrata abandoned its bid last year after Anglo asked for a so-called put up or shut up ruling from the U.K. Takeover Panel. Anglo CEO Cynthia Carroll last week said the company hadnt had other discussions with Xstrata.

For a company like us there is always room for M&A, Xstratas Davis said today. We have a strong balance sheet and we have a strong M&A capability and if theres something there that makes sense, then certainly well try and capture it.

Glencore International AG, the commodities trader that already holds 34 percent of Xstrata, is studying a merger with Xstrata to gain more access to financing, two people familiar with the matter said May 3. We have not received any proposals from Glencore, Davis told an analyst briefing today.

In February, he said Xstrata was looking at a range of options and possibilities for its relationship with Glencore.

Ultimately it remains our view that a merger between Xstrata and Anglo American has some strong logic, Sanford C. Bernstein analyst Paul Galloway wrote in a note today. Xstrata will find it easier to go hostile on Anglo American if it is larger following a merger with Glencore; view Glencore- Xstrata as a stepping stone.

Lonmin Is Option

Davis, who joined Xstrata in 2001, bought Australian copper and zinc producer M.I.M. Holdings Ltd. in 2003 and Canadian nickel producer Falconbridge Ltd. three years later.

Xstrata retains 25 percent of platinum producer Lonmin Plc after ending a hostile bid for the company in October 2008 as metal prices plunged. The bid for Lonmin is likely to be revived after the platinum miners shares declined 30 percent from an April peak, Bernstein said in a July 23 report.

It remains an option, it is an option and you know we will take our time to develop our options and see where it takes us, Davis said today. We dont have any particular need to do something urgently. Its there and at the right time we will hopefully take the right decision.