Xstrata says held initial talks, no proposals made

By Eric Onstad

JOHANNESBURG (Reuters) - Mining group Xstrata confirmed on Wednesday it has held initial talks about a possible takeover following a wave of rumors, but it said no proposals resulted from the discussions.

"None of these very preliminary discussions have resulted in any proposal being made either for or by Xstrata and there can be no certainty that any such proposal will result," the company said.

It did not provide details about the discussions, but a disclosure table from the UK Takeover Panel listed Xstrata as an potential "offeree", or takeover target.

An analyst said Xstrata might be soliciting takeover bids under pressure from its biggest shareholder, privately held commodities trader Glencore, which has a 34.6 percent stake.

"I think this whole thing seems to be driven around the requirements of Glencore, not necessarily what (Chief Executive) Mick Davis wants to do," said the London analyst who declined to be named.

A cash-and-share offer would provide a cash injection for Glencore, which needs funds to pay off two key partners who would like to depart the firm, he added.

Xstrata, which press reports have linked to interest from potential suitors such as Vale and Anglo American, said it put out a statement in response to media speculation about a possible merger, which has intensified in recent days and sent its shares surging.

"Xstrata confirms that its ongoing interaction with other industry participants includes dialogue with a number of parties covering a range of topics of mutual interest such as industry consolidation," the statement said.

"Xstrata is continually reviewing opportunities within the industry with a view to adding value to its shareholders."

JUMP IN SHARES

Xstrata shares have shot up about 30 percent since November 22, riding a renewed wave of takeover speculation since the world's biggest mining group BHP Billiton shook the sector by unveiling a plan on November 8 to acquire number three Rio Tinto.

The shares slipped 0.62 percent to 3,715 pence by 0430 EST, outperforming a 1.5 percent fall in the UK mining index.

Some analysts and fund managers are skeptical about a deal being consummated, at least in the near term following the ramp-up of Xstrata shares, making suitors wary of overpaying.

The unnamed London analyst said another difficulty in doing a deal was Davis's buoyant personality which has seen Xstrata go on a takeover spree in recent years that has ballooned the firm's size.

"If he's going to do a merger with someone, he would want to be top dog. It's a bit odd, he's probably inviting people to come and talk with him, with the proviso that he's the winner," he said. "My gut feel is that nothing comes of it, it's probably a bit of a pipe dream."