Xstrata’s merger prospects appear dim

Stephen Beard Jun 22, 2009
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Xstrata’s merger prospects appear dim

Stephen Beard Jun 22, 2009
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Bill Radke: There’s talk this morning of another big and controversial mining merger. Xstrata, listed in the U.K., says it wants to join with the South African giant Anglo American — and Anglo doesn’t seem too keen on the idea. From London, Stephen Beard reports.


Stephen Beard: The merger would create a company worth around $68 billion. Analysts say the deal could save hundreds of millions a year in lower costs and taxes.

But Anglo-American has resisted Xstrata’s advances before, and is thought likely to do so again. The South African company believes it’s in better financial shape than its suitor, and it fears it might become the junior partner in any alliance.

Chris Hughes is with the financial Web site Breaking Views. He says this deal is also likely to face stiff political opposition:

Chris Hughes: Anglo-American is clearly the corporate crown jewel in South Africa. And, you know, this deal would be very difficult for South Africa to just wave through.

The steel industry is also likely to feel uneasy about the proposed deal. It would create the world’s second-biggest producer of coal used in steel-making. That would give the coal producers more bargaining power.

In London, this is Stephen Beard for Marketplace.

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