FTSE 100 Slips Despite Proposed Xstrata Merger

Share prices in mining and energy companies were dragged lower by falling commodity prices on Monday morning, and the FTSE 100 was struggling, despite a proposed merger between Xstrata and Anglo American.

Dominic Turner
shareprices.com - Wednesday, June 24, 2009

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The blue chip index was down 33.77 points, or 0.8%, at 4,312.16 points in early trading on Monday, having closed up 1.5%, at 4,345.93, on Friday.

Anglo American was, nevertheless, the best performer of all amongst FTSE 100 constituent companies, up 9.4%, after it confirmed an approach from rival, Xstrata, with regard to a merger, worth $68 billion. Xstrata said, in a statement, that a merger would provide, "enhanced scale and financial flexibility to fund future growth", and that the reasoning behind it was, "highly compelling". Conversely, Xstrata, itself, was down 1.8%, and Lonmin was down 2.6%, as investors speculated that Xstrata may be forced to sell its 25% in Lonmin, in order to pursue its Anglo American aspirations.

Weaker metal prices forced down share prices across the mining sector, with the likes of BHP Billiton, Eurasian Natural Resources Corporation (ENRC), Kazakhyms and Rio Tinto all in negative territory. The largest primary producer of silver in the world, Fresnillo, was a big loser, down 35p, or 6.18%, at 531½p, after it announced that it had abandoned a hostile takeover, worth $179 million (£109 million), for MAG Silver, which it no longer considered to be in the best interest of its shareholders.

Crude oil fell towards $69 a barrel, and energy companies were weaker across the board, as the expectation of falling gasoline markets in the U.S. influenced the mood of U.K. investors.

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