In the News - Xstrata pursues Anglo American merger

Hopes that the City is awakening from its slump were boosted by the news that FTSE 100 mining firm Xstrata has approached rival Anglo American over a possible £41bn merger.

Xstrata: pursuing merger with Anglo American (photo from Xstrata)
Xstrata: pursuing merger with Anglo American (photo from Xstrata)

Any deal is highly unlikely to be tied up quickly - the talks are said to be at a very early stage and reports suggest the board of Anglo American is far from convinced by the idea. Anglo American has resisted the advances of Xstrata on previous occasions, but this time many of its shareholders are said to be unhappy with the performance of CEO Cynthia Carroll.

The reaction?

Xstrata's chief executive Mick Davis said: 'Xstrata believes a merger of these two world-class companies with complementary assets is highly compelling.' Press reports suggested the Anglo American board are set firm in resisting any deal. But analysts seemed to back the deal, noting the vast cost savings a merger could bring. Xstrata this week published a letter to Anglo's board outlining the $1bn of cost savings a merger could bring after just three years. Media speculation also suggested, however, that the South African government may stand in the way of any deal.

Who are the PR players?

A deal of this magnitude could be one of the financial comms industry's biggest pay days of the year. Aura Financial, led by founder Michael Oke, is retained by Xstrata and will help its in-house team with the potential deal. Anglo American retains FD, with chairman of financial comms Andrew Lorenz leading the account. Anglo is set to run a bid defence campaign. Anglo also uses Brunswick in South Africa.

What happens next?

The talks are at an embryonic stage and it is not the first time such a merger has been mooted. Arguably, though, Anglo American is in a weaker position to rebuff Xstrata's advances, given shareholder dissent over its recent performance.

£41bn - Value of merger between Anglo American and Xstrata

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