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Mick to Cyn: that letter in full

June 25, 2009

An early draft of the letter from Mick Davis of Xstrata to Cynthia Carroll of Anglo American has fallen into my hands. The public interest demands that I publish it.

 

Strictly private and confidential

 

Dear Cyn

 

I’ve been told by my advisers that I ought to write to you, so here goes. I assume you read the papers. Even if none of your shareholders has actually phoned to tell you the game’s up, you’ll have read that they don’t think you’re equipped to run a big mining company.

 Funnily enough, they haven’t phoned me either, so I can’t tell you who they are, but between us girls, I rather agree.

Nothing personal, but this is a rough old game, and once the word gets around, it develops a life of its own. You may think I’ve got off pretty lightly, considering what I’ve done recently. Never mind. Nobody ever said life was fair.

 Bluntly, we both need a deal. The bankers, brokers and all their hangers-on need one too, because they’ve their bonuses to think of.

This is why I’ve told them to look hard to see how much we could save by putting our two companies together, and then to look again when the number they came up with was too small. I’ve attached a note of the result, and you’ll see that it’s now big enough to pay all their fees and leave something for the shareholders.

 We can’t make those gains without firing workers, but they are my fellow South Africans, so I feel their pain. Tell you what, though, I’ll say that the synergy estimate doesn’t assume any workforce retrenchment there. That should keep the Minister for Mines happy. She’s got to see that consolidation is the name of the game nowadays. Everyone’s doing it.

 It’s rough on you, I suppose. I do hope you like the idea of “a merger of equals”, as our financial PR advisers told us to call it, because there’s no doubt about who will be in charge once the “merger” has gone through. You’ll be well looked after, and you can go and do something better suited to your talents.

 Of course your board will reject this approach – that’s part of the game, and you should never accept the first offer. But we’re deadly serious and we’ll do everything we can to get our share price up before throwing in some cash to sweeten the deal. Now be a good girl, and don’t make too much fuss. There’s no percentage in messing with the big boys, is there?

  Yours fraternally

 

Mick

 

 

 

PS I don’t intend to leak this letter, but you how these people are, don’t you?

 

 

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    "City Editor, The Daily Telegraph 1986-2005 City Editor, The Sunday Times, 1984-1986 City Editor, Evening Standard, 1979-1984 Director Templeton Emerging Markets Investment Trust plc, Finsbury Growth and Income Trust plc Passion: fly fishing (and wife Julia and seven-year-old twins)"
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