Anglo American has declared the idea of a merger with Xstrata "dead and buried" after its rival decided not to launch a bid.
Xstrata abandoned the proposal earlier today, five days before a put-up-or-shut-up deadline imposed by the Takeover Panel. This ends a four-month period in which Xstrata tried, without success, to persuade Anglo of the merits of a merger of equals.
Anglo's chairman, Sir John Parker, pledged to derive "additional value" from Anglo's asset base, which include mines producing platinum, diamond, and base metals like copper and nickel.
Parker was hired in July, just three weeks after Xstrata's approach came to light. Anglo said today that his appointment had brought "renewed focus on delivering value for Anglo American's shareholders".
"Today's announcement was inevitable because Anglo's shareholders rejected both the poor strategic logic and underwhelming valuation of Xstrata's proposal," the Anglo spokesman said. "The proposed 50:50 merger never gained any momentum with Anglo's shareholders and the idea is now dead and buried."
Shares in Anglo dropped by 3.7% this morning, making it the biggest faller on the FTSE 100 index.
Xstrata's decision means it cannot make a bid for Anglo for six months, unless another company launches a takeover or there is a material change in Anglo's circumstances.
Mick Davis, Xstrata's chief executive, insisted this morning that a merger with Anglo would have made sense, and yielded annual savings of more than $1bn (£615m) after three years.
"Our decision not to proceed with an offer before the deadline imposed by the UK Takeover Panel reflects our disciplined approach to growth and our focus on the value proposition for Xstrata's shareholders in a merger. We continue to assess a range of alternative growth options, in full recognition that transactions of this nature often take time and patience to mature," Davis said.
Xstrata argues that its interests in commodities like copper and coal put it in a stronger position than Anglo to benefit from the first stages of a global economic recovery.
Some analysts believe that the pair might yet agree a deal.
"We share Mick Davis's view that there is a compelling strategic rationale for merging the two companies… Hence our conclusion that Xstrata management may well revisit the idea at some point in the future, depending on market conditions and Xstrata's financials," said analysts at Société Générale.
Davis's plan was for a merger that valued each company at around £20bn. In July it was rumoured that Xstrata might offer a £5bn sweetener to get Anglo onside, but in the event this did not happen.