Xstrata chief ready for more tussles after Anglo rebuff
The Age
Wednesday July 1, 2009
BEFORE he became Xstrata's "Big Mick" Davis, "Teenage Mick" became the youngest qualified cricket umpire in South Africa.He recalls a batsman being hit just below the heart by a "beamer", a fast-paced full toss. Watching him get up, shaken, and falling a few balls later left an impression on the young man about how to handle such a knock."Beamers come at you on an unexpected basis," Mr Davis told a Melbourne Mining Club lunch at Lord's in London. "What does one do when one is hit by a beamer? That batsman should have got up and reasserted his conviction that he could have hit the ball to the boundary. Otherwise he would be out, and consequently he was."Mr Davis has embodied this approach as he brushes off last week's rejection by Anglo American of his proposed 41 billion ($A84 billion) merger of equals.In fact, he used his much-anticipated speech, watched on from the audience by Anglo Coal chief executive Ian Cockerill and Rio Tinto boss Tom Albanese, to declare that he is coming."Many acquisitions I have participated in have started friendly and ended hostile," he said. "I guess it reflects something about my character."You can't think about acquisitions for a decade and then not do anything," Mr Davis said. "Opportunism seems to be a dirty word in the minds of some people - for us it is about value."But it was the value of Xstrata's offer that Anglo disputed. In its rebuff of the bid - which the Swiss mining company says would save about $1.25 billion a year - Anglo scoffed at the lack of a premium.Mr Davis told the Melbourne Mining Club that the notion of a nil-premium merger was "not rocket science" and that "optionality", or the value of Anglo's investments after a merger would not be diminished."Why do people pay premiums?" he asked. "You pay a premium when you indulge in a corporate transaction because of a few things that take place. Like removing the optionality of the future and you pay them enough money so they deliver that optionality."It might not happen very often and you might not be able to do it if the other party doesn't want to play with you. But as a concept in terms of the equal share of value and the equal access to optionality, it is not such a bad idea."Mr Davis said the economic environment provided an opportunity for both companies to increase scale and diversity. "Momentum is about playing on the front foot. Backfoot players end up being disappointing cricketers," he said.
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