Local market intelligence firm Frost & Sullivan does not believe that the merger between Anglo American PLC and Xstrata will go ahead.

“Without delving much into the synergies that are likely to be realised from the complimentary businesses, such as coal and iron ore, my feeling is that it looks very unlikely that this proposed merger between Xstrata and Anglo American Corporation will be consummated. Anglo American Corporation has divested from gold to principally focus on platinum, diamonds and industrial metals. The group would want to grow the company in these sectors and maintain its unique identity and world class assets.

“It appears to me that Xstrata has long desired exposure in certain mineral groups like platinum and diamonds, where Anglo American Corporation has a strong presence. Xstrata’s hostile takeover bid for Lonmin in 2008 which would have provided exposure to platinum, fell through due to volatility in the commodities market and funding uncertainties. Their proposed merger is partly motivated by Xstrata’s desire to gain exposure to mineral groups such as platinum and diamonds, where they have little or no exposure at all.

“There will also be problems regarding valuation of assets, given the current uncertainties in global capital and commodities markets. Frost & Sullivan is also of the opinion that competition authorities, especially in South Africa, are unlikely to approve of the deal.”