It is unlikely that Mick Davis abandons the project

British Constable of OPA, the Takeover Panel, decided. Xstrata has until October 20 at 5 p.m. (London time) to declare whether he is "a firm intention to make an offer on Anglo American. In the event of abandonment, Mick Davis group should refrain from any approach for six months from date of publication of the regulatory announcement last Friday. Last week, Anglo American had submitted an application to the controller so that it can take a formal position dans this folder.

The ambiguity about the nature of the proposal for "a merger between equals" Xstrata adjourned. Unveiled by Anglo American on 21 June, she was dismissed the next day at the unanimity of the members of its Board of Directors. Mentioned reason: the consolidation of the two companies "is not attractive to the strategic plan". Since this date, the doors of the informal dialogue between the two directorates have been completely closed.

Anglo American is more than ever concentrated on the restructuring of its activities, to make them more profitable, and on the management of its massive debt, estimated at 14 billion dollars in 2009. Upon his appointment occurred on 10 July, the new Chairman of Anglo American, John Parker, said its unwavering support for the management team of the company headed by Cynthia Carroll. It relies heavily on a more rapid upturn than expected market of base metals, products that bring to Anglo American more than a quarter of its operational profit (Ebitda).

Xstrata would have the largest difficulty in maintaining its financial discipline claimed for its informal offer on Anglo American. Discipline appeals to shareholders because the action of Xstrata has clearly beat that of Anglo American, since the proposed merger has been disclosed. The industrial project itself convinced the financial community, since the union of the two firms would be generous in synergies (more than 1 billion, claims Xstrata). The new entity would have a range of products that rival those of the size of BHP Billiton and Rio Tinto majors and a geography of operations more balanced.

The outcome was slow

Remains the problem of the price of the transaction. Problem made more difficult by the fact that only 15 of large shareholders are common to the two companies. If they are widely expressed in the initial offer of Xstrata, those who hold that Anglo American titles require a premium in cash. The contribution of cash however was immediately rejected by the proponent of the merger, himself anxious to improve the quality of its balance sheet increased by a total debt of $ 14 billion.

The decision of the Takeover Panel held Xstrata to specifically display willingness. It is unlikely that Mick Davis abandons the project. He cherishes the long ("Les Echos" of Thursday) because this is the option of external growth the most suited to its long-term strategy, centred on the creation of a group able to compete playing the trio of head of the industry: BHP Billiton, Vale and Rio Tinto. The determination of Xstrata to unite with Anglo American is certainly not initiated by the diktat of the British regulator. In this light, it is unlikely significant Mick Davis firm chooses to withdraw the race six months or that it formalizes its informal offer.

A temporary withdrawal would have two advantages: the valuation gap against Anglo American could widen further. a semester is a too short period for significantly increasing the profitability of the business of Cynthia Carroll. On the other hand, the launch of a formal proposal for takeover would more easily Xstrata to deepen the discussions with the major shareholders of the target on the evaluation of the two companies. On the other hand, it is unlikely that the proponent of the consolidation folds on a more accessible prey as Lonmin, which holds 25 of the capital. The acquisition of the third world producer of Platinum would constitute an interference with the purchase of Anglo American, which one of the subsidiaries is other than Anglo Platinum, the undisputed leader of this precious metal. The South African regulator would see the creation of a giant of the Platinum able to deliver nearly half of world production of this precious askance.

Conclusion: despite appearances and despite the wishes of Anglo American, the initiative of the Takeover Panel does not accelerate the outcome of the case.