Xstrata has proposed an all-share ‘merger of equals’ with rival mining firm Anglo American. This would create a mining giant with a nominal market value of more than $40bn, with estimated cost savings of between $700m and $1.7bn per year. Mick Davis, Xstrata chief executive, is understood to have offered Anglo a nil premium all-share deal, based on the company’s roughly similar market values, enterprise values, and earnings. Both companies would own 50 per cent of the enlarged entity.

Xstrata’s lean and decentralised structure is, however, the opposite of Anglo’s. Further problems could arise from cultural differences and the need to raise debt to complete the merger. Hover over the chart for previous merger and divestment activities of the two companies