Charlotte Mathews
7 July 2009
Johannesburg — PRESSURE mounted on Anglo American's board yesterday to entertain the merger proposal from Xstrata after one of the group's biggest single shareholders, Old Mutual , told Reuters that if Xstrata presented an attractive offer Old Mutual would evaluate it.
Pressure on Xstrata to sweeten its offer is reflected in recent share price moves. Anglo stock gained up to 15% since just before the proposal was announced three weeks ago until the middle of last week.
The price has since weakened slightly to £16,28 on the London Stock Exchange, reflecting increasingly negative sentiment about prospects for global growth and commodities demand, but they are still above their mid-June level.
Old Mutual Investment Group portfolio manager Anwaar Wagner, whose group holds 3% of Anglo, told Reuters Anglo's shares were significantly undervalued.
If Xstrata stuck to its "merger of equals" plan, Anglo would be better off remaining independent. Old Mutual was quite happy to wait for Anglo's cost-cutting measures to bear fruit as an alternative to the Xstrata offer, he said.
An Xstrata spokesman said it was aware of Old Mutual's comments, but "our intention remains to enter into dialogue with Anglo American to discuss the proposal that we have made public".
Support for Xstrata's merger proposal has come from several quarters, including rating agency Fitch and former Anglo American senior executives, who hold a significant portion of their personal wealth in Anglo shares and are angry at the passing of last year's final dividend.
But there has also been support for an independent Anglo, including from South African unions and the government, which initially expressed alarm at the prospect that local retrenchments would form part of Xstrata's promised 1bn cost savings.
Xstrata has said retrenchments in SA were not in its plan.
The biggest single shareholder in Anglo is the Public Investment Corporation with 4,8%. About 25% of Anglo's shares are held in SA and 40% in the UK.
Anglo American CEO Cynthia Carroll and Mining Minister Susan Shabangu discussed Anglo's medium-term and long-term priorities at a meeting on Friday, said the department's communications head, Jeremy Michaels. Shabangu expressed satisfaction with Anglo's "constructive participation" in SA's mining industry.
Xstrata proposed an "all-share merger of equals" to Anglo's board three weeks ago, citing complementary portfolios of assets and potential cost savings of about 1bn from the merger.
Anglo's board rejected the approach unanimously, saying it would dilute Anglo's unique exposure to iron ore, copper and diamonds, and the terms were "totally unacceptable".
Anglo is rumoured to be seeking defences to Xstrata's approach, including introducing a major shareholder such as Vale of Brazil or Chinalco of China, or inviting a partner to help co-fund development of its MMX Minas- Rio project in Brazil.
Its activities in SA span platinum, iron ore, coal and diamonds; Xstrata has ferrochrome, coal and platinum assets.
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