Anglo American comprehensively rejected rival miner Xstrata's nil-premium merger proposal yesterday, claiming it was "unattractive" for shareholders and had been pitched on "totally unacceptable" terms.
After barely 24 hours to consider the offer – and despite a 4.6 per cent share price lift after Sunday's acknowledgement of the approach from the Xstrata chief executive – Anglo unequivocally snubbed the merger plan.
"The Board has concluded that the strategic case for the combination is unattractive for Anglo American shareholders. Irrespective of this lack of strategic merit, the terms proposed by Xstrata were totally unacceptable," the company said in a statement. "In the light of the review the Board of Anglo American has unanimously concluded that the proposed combination with Xstrata would not be in the interest of Anglo American shareholders."
The company said the tie-up would weaken its strategic position by diluting its strong role in high-performing platinum, iron ore and diamond markets with exposure to nickel and zinc.
Xstrata was miffed at the speed of the refusal. "We are disappointed by Anglo American's rapid rejection," a spokesman for the company said. "We are also surprised that the Anglo American board has not seen fit to engage with Xstrata to discuss our proposal in view of the substantial value for both companies' shareholders that would arise uniquely from a merger of the two companies."
Although analysts estimated synergies of $700m (£428m) to $1.7bn a year, particularly from streamlined head office functions, Anglo rejected the claim that there are significant potential savings. It places greater store by its own $2bn (£1.2bn) cost cutting programme, half of which is to come from procurement and half from efficiency savings by 2011.
The rejection came after a day of speculation that Xstrata would be forced to change its terms. Anglo was always known to be wary, an despite some shareholder criticisms of Cynthia Carroll, the Anglo chief executive, Xstrata is widely thought to need the deal more. The group struggled after the collapse of last year's $90bn approach from Vale, the Brazilian iron ore giant, and it held a $5.9m rights issue in March to pay down debts boosted by last October's decision to more than double its stake in Lonmin.