Switzerland-based mining group Xstrata plc (Xstrata) has approached its rival UK-based mining company Anglo American Plc with a merger proposal, as both Anglo American and Xstrata confirmed on June 22.
Both confirmations came after press speculation that Xstrata's chief executive Mick Davis wrote to the board of Anglo last week to propose opening discussions on a £41 billion ($67.37 billion) merger.
According to a statement released by Anglo American, the board of the company has received a preliminary proposal from Xstrata which may or may not lead to a transaction involving the group. Anglo American has noted that the situation in question is at a very preliminary stage and that there is no certainty that any transaction will be forthcoming.
In addition, Xstrata released a statement, confirming that it recently sent a written proposal to the board of Anglo American seeking their consideration of a merger of equals of the two companies.
Xstrata said, "We believe a merger of these two world-class companies with complementary assets is highly compelling. 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 added, "We are seeking to engage with the board of Anglo American regarding a merger of equals that would realize significant value for both companies' shareholders. There is, however, no assurance that any transaction will be forthcoming from Xstrata's proposal. Any further announcement will be made if and when appropriate."
However, a $67 billion merger of the coal giants Xstrata and Anglo American would disturb the global steel industry which has already been troubled with a tie-up between two of the major iron ore suppliers, Australian miners Rio Tinto and BHP Billiton.
If Xstrata acquires Anglo American, it would control 11 percent of the global metallurgical coal market, according to Australian market and technical analysis firm AME Mineral Economics. That figure would make it second only to BHP in terms of coking coal production.