August 22, 2008

Vale Xstrata tie up - Chinese sniffing but unlikely to bite

Reuters reported that China's state backed miners have looked at Xstrata but are unlikely to bid for it, leaving Brazil's Vale or Anglo American best placed to snap up the Anglo Swiss miner.

A China focused investment banker said that "If you are Xstrata you are going to talk to as many people as possible. There will be others who are interested and they want to try to smoke those people out.”

He said big Chinese metals and coal companies such as China Shenhua Energy Co Ltd, Yanzhou Coal, Jinchuan Copper, aluminium giant Chinalco and state owned trader Minmetals were interested in Xstrata.”

He however added that "It is not clear whether they can do a deal of this size. It would be possible but I am not sure that's how the Chinese would go about doing this."

He said "There is no way that anyone at Xstrata would talk to anyone unless Glencore told them to. Glencore has made some sort of decision that if they can get the right price then they're probably sellers. He said they will be looking for an equity stake and probably cash as well. That plays into anybody's hands who's got cash or who can play with stock. That could be Anglo or Rio Tinto.”

Another investment banker said Shenhua and Chinalco's listed arm Aluminium Corp of China Ltd also known as Chalco had looked at Xstrata late last year. He said the Chinese were spoken to some time ago and two of the big Chinese players looked at it. Now it's moved on."