Anglo American has dismissed Xstrata's proposed £41 billion all-share 'merger of equals' deal, it emerged last night (22nd June).

The global mining giant's board met to consider its Anglo-Swiss rival's offer but took just under two hours to come to a unanimous decision that it was "totally unacceptable".

Anglo Chief Executive Cynthia Carroll explained that the company could not find any strategic benefit to the offer and affirmed that it would be better served to remain independent.

"The initiatives we have underway for asset optimisation are on track," she told the Financial Times.

"We have been reviewing strategic alternatives for some time and we have considered different combinations [but the Xstrata deal is] case closed, on the basis that it was proposed."

Anglo also released a statement explaining that a merger would "profoundly impact the nature of the group's portfolio by significantly diluting [its] unique exposure to the structurally attractive platinum, iron ore and diamond markets".

However, reports suggest that Ms Carroll's view is not shared by some of Anglo's main shareholders, who are attracted to the sizeable overlap between the two firms' interests.

They were angry about her decision to suspend final dividends in February and are now hopeful that the quick refusal will just be an opening gambit in an eventual premium deal.

On hearing the news, an Xstrata spokesman commented: "We are disappointed by Anglo American's rapid rejection of our proposal for an all-share merger of equals.

"We are also surprised that the Anglo American board has not seen fit to engage with Xstrata to discuss our proposal in view of the substantial value for both companies' shareholders that would arise uniquely from a merger."

Meanwhile, another potential issue arose yesterday for Xstrata after the South African department of mining suggested that the proposed deal could result in job losses at Anglo.

The firm has most of its mines in the country and Jeremy Michaels, Chief Communications Director at the ministry, suggested that workers could be badly impacted.

"At face value it raises concerns about competition issues in the industry and a whole host of other issues, as well as the impact on jobs," he told Reuters.

"Jobs would be the significant concern."

If the deal can be resurrected and thrashed out, the resulting company would be the world's largest producer of zinc, platinum, coal for power stations and ferrochrome.

Sources:

Anglo rejects Xstrata merger offer (22/06/09)

UPDATE 4-Anglo rejects Xstrata merger of equals plan (22/06/09)

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