Just when you thought M&A was dead, along comes the $68bn “merger of equals” proposal between Anglo-Swiss mining giant Xstrata and rival Anglo American.

Xstrata confirmed over the weekend that its chief executive Mick Davis recently wrote to Anglo American’s outgoing chairman Sir Mark Moody-Stuart about doing a deal. On the back of that, Anglo’s shares surged as much as 12.4 percent before falling back during Monday’s trading.  Spurred on by uncertainty in the global economy, a need for substantial cost-savings, the recent merger of Rio Tinto’s iron ore business with that of BHP Billiton’s – and a belief that Xstrata must double its size to catch its closest competitor, Rio Tinto – and you have the rationale behind Davis’s thinking.

“The combination would create a premier portfolio of operations diversified across multiple commodities and geographies, with enhanced scale and financial flexibility to fund future growth,” Xstrata said in a statement. According to Citi analysts, the deal “makes financial and strategic sense, and could create synergies of up to $750m.  The combined entity would be a global leader in base metals, platinum, ferrochrome and coal”.

Put another way, the new company would be number one in zinc and platinum production, as well as thermal export coal and ferrochrome.  It would be number two in copper, number four in nickel, and number five in iron ore and coke. Even though metal prices have made major gains for the year to-date, mainly driven by robust Chinese industrial activity and restocking, Chinese imports of those commodities are slowing.  Xstrata sees a tie-up with Anglo American as a defensive move.

While some of Xstrata’s major shareholders – including Glencore, BlackRock and Capital Group – are said to be behind such a merger, Xstrata’s financial advisers, Deutsche Bank and JPMorgan Cazenove, will be facing substantial difficulties to close a deal. Already, Anglo American’s advisers, Goldman Sachs and UBS, are mounting their client’s defence.  Apparently, Anglo’s assets are better quality and have more durability.  “Why would you want to dilute that portfolio with lower value assets?” an informed source told Reuters.

There would also be a clash of cultures between the two mining groups.  Anglo American’s chief executive Cynthia Carroll is understood to have a more command-and-control style, while Davis believes in more self-autonomy of business units.  Indeed, Carroll has so far not been persuaded by Davis’s overtures since Xstrata recapitalised its balance sheet with a $5.9 billion rights issue in March. “Anglo’s reluctance to do a deal and the stark difference in corporate cultures make a tie-up a possibility rather than a probability, in our view,” Citi stated.

It is also unlikely that Xstrata could go hostile since that would rankle the South African government, which has a 5.5 percent stake in Anglo through the Public Investment Corporation.

As for Brazil’s Vale, which has been mooted as an alternative partner for Anglo American or Xstrata, it would be financially stretched.  It has $9bn of net debt: gearing that up further would “seriously risk” its investment grade rating.  Paper financing would be complicated by Vale’s dual structure of ordinary and preferred shares.

If the global recession wasn’t enough, with its idled auto factories and demand dwindling from the construction to the ship-building industries, the world’s steelmakers are facing the kind of consolidation that could well be a transformative event for the business.

Coal giant Xstrata aims to buy Anglo American for $68 billion in a tie-up between two of the biggest iron ore suppliers, creating the second-largest producer of steel-making coals. The move follows joint-venture plans from ore suppliers BHP Billiton and Rio Tinto and is seen as a big threat to steelmakers’ ability to exert any control over falling prices. Expect plenty of opposition from governments about too much pricing power residing in too few hands.

But the deal has other obstacles as well. Xstrata is offering effectively no premium to Anglo shareholders, which is producing loud squawks of outrage from investors. Perhaps by the time this one gets ironed out, the global recovery will be in full swing.

The Xstrata/Anglo deal is probalby going to be all the rage at the annual Steel Survival Strategies conference, which kicks off in New York on Tuesday with executives from U.S. Steel, ArcelorMittal and AK Stee expected to speak.

Yahoo’s Gerry Yang may have thought that giving Carl Icahn a board seat would calm the roiling waters that threatened to pull the chief executive under. But a recount of the vote for its board revealed a strong protest vote against five of nine directors, including Yang. The Internet company said revised vote tallies showed 33.7 percent of votes withheld for Yang, the company’s co-founder. That’s more than twice the opposition to his reappointment to the board as in the disputed first count. Yang has been under pressure for months over failed attempts by Microsoft Corp to buy Yahoo and over questions about his leadership. Analysts were split over whether the recount, while potentially emboldening for critics, was a symbolic embarrassment to the leadership or a new threat to its power. Ahead of the Aug. 1 meeting, Yahoo settled a proxy fight with Icahn, giving the billionaire investor and two members of his proposed slate seats on an expanded board of 11 members instead of the previous nine.

Austrian oil and gas group OMV has called off its unsolicited $23 billion bid offer for Hungarian rival MOL, saying European Union restrictions were too tough to make the deal worthwhile. The move ends an acrimonious year-long standoff between the companies that had begun to irritate some investors and weighed on OMV’s share price. The stock rose nearly 8 percent to a three-week high of 45.60 euros on relief a deal was off. “It was a bad strategic move to make an offer, so this should just narrow the situation,” said Erste Bank analyst Jakub Zidon.

And here’s one from the unwanted advances department: Acquisitive miner XstrataLonmin, unveiled a $10 billion takeover bid for the world’s third-biggest platinum producer, to diversify its business from industrial metals such as copper. South Africa-focused Lonmin swiftly rejected the bid as its shares soared 51 percent to a high of 35 pounds on Wednesday, slightly over Xstrata’s planned offer of 33 pounds a share. Lonmin - and this perhaps is no big surprise — rejected the bid as undervaluing the firm.

Other deals of the day:

* Hunting is to sell its Canadian-based oil and gas division Gibson Energy to private equity firms Riverstone Holdings and Carlyle Group for C$1,270 million ($1.22 billion).

* China’s Tongling Nonferrous Metals said it planned to buy a 51 percent stake in a copper smelter based in Inner Mongolia for 450 million yuan ($65.7 million).

* Newly-formed memory chip maker Numonyx announced a big expansion to its tie-up with South Korea’s Hynix Semiconductor, as the former makes a new push into the NAND memory sector.

* Shares in Sony Corp traded higher after the electronics maker said it had agreed to buy Bertelsmann’s 50 percent stake in their Sony BMG music joint venture for around $900 million.