DealZone

Chinalco, Vale hawks circle as Xstrata’s canary swoons

June 23, 2009

With Anglo having spurned a premium-less bid from Xstrata, the chances of the proposed “mergers of equals” getting done is dimming. The spurned suitor said it was disappointed, but that’s about all it said, so while the possibility of a hostile approach cannot be ruled out, analysts say such a costly alternative is highly unlikely.

Analysts had been reasonably upbeat on Xstrata’s proposal, talking up the merits of a tie-up even as the steel industry shuddered and the government of South Africa, where Anglo has the bulk of its operations, squawked.

But just as investors were dumping their Anglo shares, talk emerged of the possibility of interest from two emerging market heavyweights: China’s Chinalco and Brazil’s Vale. Anglo’s stock quickly steadied.

Having been thwarted in its bid to acquire much larger miner Rio Tinto, China has shown tremendous appetite for a deal that would secure it the resources it desperately needs to keep its industry humming. The same goes for Brazil.

If it turns out Xstrata has opened the door to state-backed muscle for a deal — targeting itself as well as Anglo — Xstrata CEO Mick Davis may find his own firm fending off takeovertures.

Comments
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Mick Davis may have opened pandorra’s box by his actions, and instead of eating a big fish himself (which turned out to be too big) he might now see some ferocious predators circling his own company.

 

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