Swiss-based mining firm Xstrata has confirmed that it has ÔÇ£no intentionÔÇØ of making an offer for its rival, London-based Anglo American.
Xstrata first approached Anglo in June with a view to a merger ÔÇ£of equalsÔÇØ, but Anglo dismissed the approach as ÔÇ£totally unacceptable" and "lacking strategic merit".
Xstrata was ordered by the UK Takeover Panel to submit an offer for Anglo by 20 October or walk away for six months, and the company has now confirmed that it has dropped the proposed hostile takeover bid.
AngloÔÇÖs CEO Cynthia Carroll, who is currently engaged in a series of aggressive cost-cutting measures, had called the approach by Xstrata a ÔÇ£distractionÔÇØ, prompting the Takeover Panel to issue the deadline.
Carroll has pledged to save $2 billion in costs by 2011, and to develop new iron ore, copper and nickel deposits in Latin America to increase the companyÔÇÖs earnings.
Xstrata, which is headquartered in Zug, Switzerland, wanted the two companies to combine mining operations in Canada, Australia and South Africa and cut annual costs by $1 billion.
Such a merger would have created the world's biggest producer of zinc, platinum, coal for power stations and ferrochrome. It also would have been the second-largest producer of copper and coal for steel-making.
Anglo owns stakes in the worldÔÇÖs biggest diamond and platinum producers. It has stakes of 80 per cent in Anglo Platinum, 45 per cent in De Beers and 64 per cent in Kumba Iron Ore.
ÔÇ£It is regrettable that the Board of Anglo American immediately rejected our approach, without engaging with Xstrata to investigate the potential to create more value than either company could alone,ÔÇØ said Mick Davis, CEO of Xstrata, in a statement.
Davis went on to say that ÔÇ£the compelling strategic rationale for a merger of the two companies remains undiminished and has been recognised by shareholders of both companies.ÔÇØ
He concluded: ÔÇ£We continue to assess a range of alternative growth options, in full recognition that transactions of this nature often take time and patience to mature.ÔÇØ
Xstrata has completed more than $33 billion of acquisitions over the past six years. In October last year it walked away from its $5 billion bid for rival platinum producer Lonmin, after a deadline was set by the Takeover Panel.
Mining firms have been hit hard by the economic downturn, with international demand for metals falling.
Davis said that whatever cost-cutting initiatives the two companies embarked upon separately, they would not measure up to the $1 billion he believed the firms could achieve as a merged entity. "Cost savings measures by either company alone simply cannot realise this value, nor deliver the associated strategic benefits,ÔÇØ he said.
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