Xstrata proposes $68 billion merger deal with Anglo American

Amid pressures from major shareholders to strike a deal, Swiss mining giant Xstrata plc has sent a proposal to its arch-rival Anglo American plc seeking their consideration of a possible $68 billion merger.

It is believed that Xstrata's chief executive Mick Davis has written to the board of Anglo American last week to initiate talks about a possible merge as equals to become one of the world's leading mining and natural resources company. Anglo's response on the matter is not clear.

Xstrata has developed from a small player into one of the world's largest diversified mining groups in recent years through a series of acquisitions with operations spread over 19 countries in five continents. It is the world's largest producer of thermal coal and ferrochrome and a leading producer of coking coal, nickel and zinc. The company's turnover for 2008 stood at $27.9 billion with a net profit of $3.9 million.

London-based Anglo American is a global leader in mining with diverse mining assets in its portfolio including precious platinum group metals, diamonds, copper, nickel, zinc, phosphates and bulk commodities iron ore, manganese and coal. The company operates in 45 countries across the globe in six continents, employing around 105,000 people. The company reported revenue of $26.3 billion and a net income of $5.2 billion in 2008.

Anglo also has a 45-per cent holding in diamond miner De Beers, which has been struggling with debts of $1.6 billion.

The merger would create one of the biggest natural resources companies in the world. Based on Friday's closing stock prices on London Stock Exchange, the combined value of the companies is around $68 billion.
 
Based in Zug, Switzerland and listed on the London and Swiss stock exchanges, Xstrata, which had been keen on a close partnership for a very long time with the London-headquarterd South African miner Anglo American, believes that a merger of the two world-class companies with complementary assets is highly compelling.

Since both companies have substantial operations in Australia and South Africa, the merger would create a premier portfolio of operations diversified across commodities and countries.