Anglo American Offers $5B, UK Stocks Fell

123jump.com Staff
17 Jan, 2008
New York City

Anglo American offered $5.5 billion for two iron ore mines from controlling shareholder of MMX Mineracao e Metalicos in Brazil. Anglo American with the acqusition will increase its capacity of seaborne iron ore to 150 million tons per annum by 2017. SAB Miller released its third quarter trading update. In London trading stocks fell on the ongoing global credit market malaise. UK housing stocks gained after JP Morgan and Morgan Stanley recommended the sector.

[R]1:00PM New York, 6:00PM London- Commodity stocks drag U.K. down 0.68%[/R]

In London trading FTSE 100 declined 0.68% or 40.5 to 5,902.40.

Of the 102 FTSE 100 stocks 49 gained, 50 declined, and 3 were unchanged. Vedanta Resources led decliners with a fall of 6.63% on falling metal prices.

Other commodity stocks declined as well. Xstrata, BHP, and Rio Tinto dropped 4%.

Anglo American Plc said in a statement today the company is planning to buy two iron-ore mines from Brazil based MMX Mineracao e Metalicos, based for $5.5 billion.

The stake controlling stake of Eike Batista with holding of 63.6% shareholding will be transferred to a new company which will be demerged from MMX and will own MMX''s current 51% interest in the Minas-Rio iron ore project and 70% interest in the Amapá iron ore project.

MMX''s logistics business, LLX Logística S.A., will also be demerged from MMX as part of the same reorganisation, but will not be included in the transaction with Anglo American.

Under the proposed transaction, Anglo American will pay approximately $5.5 billion for 100% of the issued and outstanding shares of Newco, or approximately US$361.12 per Newco share (assuming one Newco share for each current MMX share), as well as royalty payments to MMX beginning in 2025 for the Minas-Rio project and 2023 for the Amapá project.

On successful completion of the offer and acquisition of minority shares at the same price Anglo American will own 100% of the Minas-Rio project, 70% of the Amapá project and 49% of LLX Minas-Rio, the owner of the Port of Açu.

Anglo American acquired 49% of the Minas-Rio project as part of its original investment announced in April 2007, which included 49% of LLX Minas-Rio.

“These two projects are a great strategic fit for Anglo American and, together with the planned Kumba expansions, will significantly increase our participation in the seaborne iron ore market to approximately 150Mtpa by 2017”, said Cynthia Carroll, CEO of Anglo American.

Of the FTSE 100 index shares Associated British Foods led rising stocks with a gain of 8.13% followed by rises of 6.37% in Taylor Wimpey, of 5.34% in Scottish & Newcastle, of 5.16% in British Land Company, and of 4.56% in Whitbread Plc.

Homebuilders rose after Morgan Stanley raised its recommendation of most of the real estate stocks from “underweight” to “overweight”. JP Morgan also urged investors to buy real estate stocks.

Baratt Developments reported first half home sales increased 26%. Completions during the same period also surged to 9,056 from 8,750.

Other real estate stocks also jumped. Persimmon gained 3.01% and Hammerson climbed 2.05%.

Retailers rose after Kesa’s Comet same store sales jumped 0.7% for nine weeks ending on January 8, 2008 at stores opened for at least a year. Marks & Spencer soared 3.17%, Wolseley spiked 2.80% and Sainsbury Plc edged up 2.37%.

Scottish & Newcastle gained on renewed takeover talks from Heineken and Carlsberg.

Vedanta Resources led decliners in the FTSE 100 index with a fall of 6.63% followed by losses of 5.20% in Kazakhmys Plc, of 4.70% in Lonmin Plc, of 4.58% in SABMiller Plc, and of 4.05% in Anglo American Plc.

SABMiller plunged after reporting today that third quarter sales slumped owing to slow consumer spending and severe weather.

The group’s lager volume growth was 7% for the third quarter. On an organic basis, lager volumes for the third quarter grew by 4%, and 9% for the year to date. Europe achieved lager volume growth of 4% during the quarter, over a comparative period that benefited from a mild winter, with year to date growth of 9%.

In Latin America, lager volumes grew by 4% in the quarter. Lager volumes were up 6.5% year to date. Africa and Asia business delivered organic growth of 8% in lager volume in the quarter and 18% year to date. Organic growth in China was 7% in the three-month period following recent price increases and reflecting slower market growth whilst India volumes were up 20%.

On 21 December 2007 SABMiller plc and Molson Coors Brewing Company announced the signing of the definitive transaction agreement for the combination of the US and Puerto Rico operations of Miller Brewing Company and Coors Brewing Company into a joint venture.

European Markets

In London FTSE 100 Index closed lower 40.50 or 0.68% to 5,902.40, in Paris CAC 40 Index decreased 68.30 or 1.31% to close at 5,157.09 and in Frankfurt DAX index lower 58.04 or 0.78% to close at 7,413.53. In Zurich trading SMI declined 59.46 or 0.76% to close at 7,788.06.