Anglo American builds defenses should Xstrata’s merger proposal turn hostile

Anglo American is talking to other mining companies and investors to take a stake in its recent acquisition, MMX Minas-Rio, as it prepares to shore up its defenses, should Swiss miner Xstrata's $68 billion equal merger proposal that it recently rebuffed, (See: Anglo American rejects Xstrata's $68-billion deal)  turn hostile.

London-based Anglo American, a global leader in mining with diverse mining assets, is seeking to sell 30 per cent of MMX Minas-Rio and MMX Amapá iron ore projects, the Brazilian iron ore producer it acquired in January 2008 for $5.5 billion.

Anglo American is reported to be talking with Dubai Natural Resources World, Bahrain-based Gulf Industrial Investment Co, Sojitz, the diversified Japanese conglomerate and the Chinese state-owned metals group Chinalco, to sell its 30 per cent stake or co-develop the Brazilian iron ore mines, which require an investment of about $3.6 billion.

According to media reports, citing people close to the situation, the negotiations are at an early stage and there is no certainty that a deal will be reached.

By selling a 30 per cent stake, Anglo American will be able to reduce a part of its $11 billion debt, accrued mainly due to the overpriced, height-of-the-commodities-boom acquisition of MMX Minas, an acquisition, which has been criticised by Anglo investors in the past.

Last week, Xstrata had sent a $68 billion equal merger proposal to Anglo American to become one of the world's leading mining and natural resources company, (See: Xstrata proposes $68 billion merger deal with Anglo American)  but Anglo, convinced that it is better off as an independent company and its assets are far more valuable than that of Xstrata's, had rejected the equal merger proposal outright.