Xstrata Seeks Merger With Anglo American

Updated from Sunday, June 21

ZUG, Switzerland -- Swiss mining giant Xstrata said Sunday it is seeking a merger with rival Anglo American PLC(AAUK Quote).

Xstrata said it "recently sent a written proposal to the board of Anglo American seeking their consideration of a merger of equals of the two companies."

"A merger of these two world-class companies with complementary assets is highly compelling," the company said in a statement posted on its Web site, adding that substantial cost savings could result if the deal proceeds.

Mining companies have been hit by a slump in demand in recent months.

Xstrata last year failed in a bid to take over another rival, Lonmin(LNMIY.PK Quote).

Analysts at Citigroup said the combined entity would be the world leader in base metals (second in copper, first in zinc and fourth in nickel), the world's largest producer of platinum, thermal export coal and ferrochrome, and a top-five producer of iron ore and coking coal, according to the New York Times.

The combined company would have sales of more than $54 billion, based on 2008 figures, Bloomberg reports. The combined company would have a market value of about 41 billion pounds ($68 billion).