JOHANNESBURG (miningweekly.com) – London-listed Anglo American suitor Xstrata, whose CEO on Monday night reportedly won mining-community hearts and minds at a London dinner, on Tuesday officially confirmed the $1-billion-a-year-plus Anglo merger synergies to the fastidious UK Takeover Panel.
While Xstrata responded to the UK Takeover Panel’s request for synergy exactitude on the company’s nil-premium merger-of-equals overture which Anglo rejected, Fairfax mining analyst John Meyer commented that its CEO Mick Davis had won hearts and minds in outlining his merger optimisation strategy in a dinner speech in the City to the Melbourne Mining Club.
Xstrata reiterated to the UK Takeover Panel that the annual $1-billion-plus synergies would be realised by the third full year of the completion of the proposed merger, and said that the costs of realising a merger with Anglo would not exceed a once-off $500-million in total, and that this would be incurred in full in the first two years following the merger's completion.
These estimates were the only ones that Xstrata had reported on under the City Code on Takeovers and Mergers, and, accordingly, the only ones endorsed.
Meyer said that Davis had, in his speech, elucidated on his style of acquiring assets, stripping out costs and selecting “better managers for better focus on operations”, which involved the devolution of power to managers who were mandated to create value.
“The strategy reminded some of Lord Hanson in his heyday,” Meyer added, the late Lord Hanson being one of Britain's most successful business people during the Thatcher era.
While the concept of nil-premium mergers had been “well put”, industry experts believed that Xstrata would need to “sweeten” the deal with some additional compensation in order to achieve full shareholder support.
Meyer said that, although Davis’ commodity views involved a general dislike of those commodities that related to Western consumer demand, the exception was platinum, for which both Western and Eastern demand was assured owing to its range of automotive and other applications.
Davis saw copper as the building block for developing economies and continued to believe the supply side of the mining equation would again struggle to meet demand for commodities in key areas.
Davis reportedly refused to comment on the potential for Glencore to list or reverse into Xstrata.
Meyer described the prospect of Glencore listing or becoming part of a listed entity as being potentially "damaging" to its business.
“The audience of hardened mining professionals seemed greatly impressed by the delivery and the content of the speech. Davis has won the support and admiration of many and looks well set to take on Anglo,” Meyer concluded, after recalling that Xstrata had grown from an unloved $500-million ferrochrome, magnesium and aluminium business into an £84-billion company in six years.