Xstrata Won't Bid For Anglo American

LONDON (AP) -- Mining company Xstrata PLC said Thursday that it won't make an offer for rival Anglo American PLC, backing out of a merger proposal which Anglo American had firmly resisted.

In May, Anglo American rejected a merger overture from Xstrata, its Anglo-Swiss rival. The proposed combination would create a group worth $68 billion, ranking the combined company behind BHP Billiton and Rio Tinto.

Thursday's announcement came days ahead of an Oct. 20 deadline set by London's Takeover Panel for Xstrata to "put up or shut up."

Xstrata is now barred from making another for Anglo American for at least six months. However, Xstrata said it reserved the right to participate in a third-party bid for Anglo American.

Xstrata shares were down 1.8 percent at 1,012 pence on the London Stock Exchange. Anglo American shares were down 3.6 percent at 2,228 pence.

"Although Xstrata would clearly love to undertake a deal at some point, for now it is unwilling -- and unable -- to pay the premium demanded by the shareholders of Anglo American," said Jonathan Jackson, analyst at Killik & Co. in London.

"The pressure is now on Anglo to unlock value from within the group and bring back onside a shareholder base that was angered by the decision to cut the dividend in the spring," Jackson added.

Xstrata left the door open for a further offer if it was backed by Anglo American's board.

"Our decision not to proceed with an offer before the deadline imposed by the U.K. Takeover Panel reflects our disciplined approach to growth and our focus on the value proposition for Xstrata's shareholders in a merger," said Mick Davis, Xstrata's chief executive.

"We continue to assess a range of alternative growth options, in full recognition that transactions of this nature often take time and patience to mature."

Anglo American said it was confident of its future as an independent company.

"The board continues to have full confidence in the value inherent within the group's unique asset base and the additional value that we can drive from it," said the company's chairman, Sir John Parker.

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