RUMOURS of two new possible bidders for American, Chinalco of China and Vale of Brazil, swirled around London markets yesterday even as South African labour and government spokesmen supported Anglo’s rejection of Xstrata’s approach.
Xstrata’s bid was seen as putting Anglo “in play”, in other words open to alternative offers.
Anglo’s board said on Monday that it had agreed unanimously there was no “strategic merit” in a merger with Xstrata.
It would dilute Anglo’s unique exposure to platinum, diamonds and iron ore while increasing its exposure to nickel and zinc.
But irrespective of that issue, Anglo’s board said the terms proposed by Xstrata were “totally unacceptable”.
Xstrata said at the weekend it had proposed to Anglo that the two groups merge to create a resources group worth $65bn, which would be the third-biggest in the world.
“Xstrata has strong backing for its merger proposal from some major institutional shareholders and will gain further support for the deal despite its rejection today,” John Meyer of Fairfax Investment Solutions wrote in a note.
“The Anglo board will need to demonstrate an ability to generate superior gains to persuade investors to maintain its independence.”
According to Reuters, market speculation was that Chinalco, which had proposed taking a substantial stake in Rio Tinto, could make an offer valuing Anglo at $45bn, from $32bn before Xstrata’s announcement. Chinalco’s spokesmen in London declined to comment on the rumour.
ING analyst Nick Hatch said Vale might consider making a bid for either Anglo or Xstrata, while Nomura Securities analyst Paul Cliff told Bloomberg there was a better fit between Xstrata and Vale than Anglo and Vale. Vale also declined to comment.
Mining Minister told journalists during a media briefing in Parliament yesterday that the merger would be unhealthy, Reuters reported.
“Definitely, monopolies cannot be promoted in SA,” she said.
The National Union of Mineworkers (NUM) said in a statement it opposed all forms of merger and applauded Anglo for rejecting Xstrata’s approach. It said mergers resulted in restructuring, re-engineering and massive retrenchments.
Trade union Solidarity agreed with the NUM.
“ The last thing employees need now is the uncertainty that accompanies the talks about a takeover, especially while the economy is in a recession,” Solidarity spokesman Jaco Kleynhans said.
According to Nomura Research it would be difficult to push through the merger in SA due to competition and labour concerns.
There could be some speculative activity in the rand on the assumption it would result in large inflows of capital to SA, but Nomura disagreed because it expected that the merger, if it happened, would be an all-share deal.
mathewsc@bdfm.co.za