UPDATE: Anglo American, A Glencore-Xstrata Takeover Target -Executives
08 Février 2012 - 2:42PM
Dow Jones News
The proposed combination of Glencore International PLC (GLEN.LN)
and Xstrata PLC (XTA.LN) may create a company with enough financial
muscle to go after globally diversified miner Anglo American PLC
(AAL.LN), mining industry and financial executives said
Wednesday.
Anglo-Swiss miner Xstrata and commodities titan Glencore's
planned merger would create a mining and commodities trading giant
with a market value of $90 billion that would generate more than
$200 billion in annual sales.
Speaking on the sidelines of the Mining Indaba conference here,
mining entrepreneur Robert Friedland, the chairman of Ivanhoe Mines
Ltd. (IVN.T), told Dow Jones Newswires that Anglo American is
definitely a takeover target if this week's announced proposal
creates Glencore Xstrata International PLC as the merged behemoth
would be called.
"It's blatantly obviously that Anglo is a takeover target," he
said.
He wouldn't provide details on why but said: "I would be
surprised if they [Glencore-Xstrata) don't eventually" make a move
on Anglo American.
Other financiers and senior industry executives in the mining
industry have voiced similar views.
"The company that has been left high and dry [as a result of the
announced Glencore-Xstrata merger] is Anglo American," said Mark
Tyler, head of resource financing at Nedbank. "Someone is going to
buy Anglo," he said, noting that Glencore-Xstrata was a very likely
candidate given Xstrata's previous attempt to merge with Anglo
American.
Tuesday, Anglo American Chief Executive Cynthia Carroll,
declined to comment on the Glencore and Xstrata deal but said that
any merger and acquisition activity her company pursues would be
in-line with its overall objective to only focus on major assets.
"We aren't going to deviate from our approach and forgo our
objectives for something that isn't tier one," she said.
In 2009 Xstrata approached Anglo American to explore the
potential for a merger of equals but Anglo American quickly
rejected the offer on grounds that it would dilute Anglo American's
attractive exposure to platinum, iron ore and diamond markets while
increasing exposure to nickel and zinc.
Xstrata's Chief Executive Mick Davis said at the time that he
lamented Anglo American's decision to reject the offer before
exploring the potential value that could be generated from such a
merger.
"The compelling strategic rationale for a merger of the two
companies remains undiminished and has been recognized by
shareholders of both companies," Davis noted after retracting
Xstrata's offer. He said the merger could have generated over $1
billion in pre-tax annual synergies starting on the third year of
deal's closure.
Tyler said that Anglo American shareholders might this time
around push the company to strike a deal. Shareholders of Anglo
American, now the smallest of the big five diversified mining
companies by market value (if Glencore and Xstrata are counted as
one company), may feel Anglo American should combine with another
company to gain more heft in order to extract more operational
efficiency from economies of scale, Tyler said.
Friedland noted that the proposed Glencore-Xstrata merger makes
sense, particularly in an industry where companies merge or buy one
another in part to lower production costs and reduce overhead
costs. "The big fish eat the little fish," he said.
Friedland said the Glencore-Xstrata merger would create a
formidable company in the mining industry but could face close
regulatory scrutiny as a result. The combination of the two
companies would put one-third of the world's sea-born thermal coal
market in the hands of one player, he said. "There is no oil
company that has that" kind of market share, he noted.
-By Alex MacDonald, Dow Jones Newswires; +44 (0)7776 200 924
alex.macdonald@dowjones.com
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