Reuters | Mon, 12 Oct 2009 16:15 [miningmx.com] -- Mining group Xstrata has told a top-10 shareholder that it would likely abandon its pursuit of rival Anglo American, the investor said on Monday.
"They have pretty much indicated to us that they will be walking away," the investor, who declined to be named, told Reuters.
"They (Xstrata) think that with the new Anglo chairman coming in, they don't think they have enough support really to press and they feel there is no point in making it hostile."
British regulators issued a ruling on October 2 requiring Xstrata to make a formal takeover offer by October 20 or undertake not to return before April.
"Xstrata are just going to wait for six months and see if things deteriorate from an Anglo perspective (or) if Anglo Chairman John Parker changes his view. We think this is unlikely," the investor said.
HEARD ON THE STREET: Xstrata Blinks 7:46 am ET 10/15/2009 - Dow Jones
By Matthew Curtin A DOW JONES COLUMN
So Xstrata chief executive Mick Davis has blinked, stared out by Anglo American Chairman Sir John Parker. Rather than make his nil-premium merger approach to Anglo official, Davis is walking away. But it is unlikely to be for good. Sir John successfully persuaded shareholders to give Carroll more time to turn improve Anglo's performance. As a result, Xstrata's idea of nil-premium merger never gained momentum among investors, leading Davis to conclude it stood little chance of winning regulatory approval in South Africa, where Anglo is considered a national champion. Nor was Xstrata willing to raise its offer without engagement from the Anglo board. But that doesn't mean investors have rejected the strategic rationale for combining the two miners, as Anglo suggests. Xstrata's withdrawal means the logic of the deal has yet to be tested. But the successful merger of BHP and Billiton, which had similarly complementary portfolios, suggests it could yield substantial benefits. Anglo chief executive Cynthia Carroll now needs to make progress on multiple fronts if Sir John is not to find himself under pressure to engage with Davis in the future. These include delivering on the $2 billion in cost savings promised over this year and next; turning around Anglo's marginal, highly-geared platinum mines; and bringing the Minas Rio iron-ore operation in Brazil into production on time in 2012 to demonstrate that Anglo is capable of executing big projects. Without a strong turnaround in diamond demand, Anglo may also have to refinance De Beers. Anglo will remain under the microscope not least because the gap between its share price performance and Xstrata's is likely to widen. Not only is there no prospect of an Xstrata offer for at least another six months, but Anglo's erstwhile suitor is much better geared to surprisingly strong demand for base metals and coal in Asia while the recovery in the developed world which Anglo would benefit from remains sluggish. Anglo may have won this skirmish, but the war is far from over.