Xstrata, the mining giant, is digging in for a two-year battle in its attempt to merge with Anglo American, its Ftse 100 peer.
Mick Davis, the Xstrata chief executive, announced a proposal for a "merger of equals" with Anglo last Monday. Cynthia Carroll, Davis's Anglo counterpart, is fighting the move. A source close to Xstrata said on Friday: "This is an intellectual battle. It's not about the personalities of Mick and Cynthia. Xstrata is playing the long game and this could take 18 months to two years."
An Anglo source said the company had also accepted that this would be "a long haul".
Xstrata is keen to create a market leader capable of taking on the world's biggest miners, such as Rio Tinto and BHP Billiton, groups that are listed in both Australia and London. Anglo American is worth about £24bn and Xstrata close to £20bn, and a merger would currently create a £43.6bn company. Consultants advising Xstrata estimated that $1bn of cost savings a year could be made by the third full year after merger.
A day after Xstrata's announcement, Anglo told the London Stock Exchange: "The board has concluded that a combination with Xstrata would profoundly impact the nature of the group's portfolio by significantly diluting Anglo American's unique exposure to the structurally attractive platinum, iron ore and diamond markets while increasing exposure to nickel and zinc."
A source close to Anglo said: "The decision was reached after four days of careful consideration and analysis of the proposal and, of course, Xstrata is very well known to Anglo, with a potential combination having been examined a number of times in recent years." This has led to speculation that Xstrata could go hostile, though this now seems unlikely. Xstrata instead made its case to investors by publishing the letter it originally sent to Anglo the previous week detailing its merger plans. However, Mr Davis also started a war of words with the publication of the letter, saying: "It is regrettable that Anglo American's board rejected this proposal without any engagement with Xstrata, just days after receiving our approach."
Aviva Investors, which holds stakes in both miners, supported Anglo's rejection, arguing that it saw "little financial or strategic merit" in the tie-up.
Later in the week, Mrs Carroll flew to Brazil to inspect some of Anglo's operations in the country. However, this led to speculation that she was in talks with another possible suitor, Vale, the Brazilian miner that made an offer for Anglo last year. Anglo sources have since dismissed the chatter. Other reports have suggested that Chinalco, the Chinese aluminium group, might also make a tilt for Anglo.
Xstrata is being advised by JP Morgan Cazenove and Deutsche Bank. Anglo's defence is handled by UBS and Goldman Sachs. Anglo's share price was 1804p when the market closed on Friday, down 1.47 per cent on the start of the day's trading. Xstrata was up 2.51 per cent to 686p.