Oct. 2 (Bloomberg) -- Xstrata Plc, proposing a 24.7 billion-pound ($39.3 billion) takeover of mining company Anglo American Plc, must make a formal bid or walk away for six months, the U.K.’s Takeover Panel said.

The regulator said today Xstrata has until 5 p.m. on Oct. 20 to make an offer. Anglo sought the so-called put up or shut up ruling as Xstrata continued to seek talks about the plan even after it was rejected on June 22.

Xstrata is seeking to combine mines in Canada, Australia and South Africa with nearby sites operated by Anglo to create a mining group that could compete with BHP Billiton Ltd., the largest. London-based Anglo, owner of stakes in the world’s biggest diamond and platinum producers, rejected the approach in June, saying it was “totally unacceptable” and would dilute its superior mining assets.

“Perhaps it’s recognition, and an acceptance from Xstrata, that the deal is dead in the water,” Charles Kernot, an analyst at Evolution Securities Ltd. in London, said by phone. He has an “add” rating on Xstrata shares and recommends buying Anglo.

Anglo Chairman John Parker said in a statement that the company “reaffirmed our conclusion that Xstrata’s proposal is not in the interests of our shareholders.”

‘Merger of Equals’

“We note the Takeover Panel announcement today and we will respond by the agreed deadline of Oct. 20,” Claire Divver, a spokeswoman for Xstrata in London, said by phone.

Xstrata slipped 18.5 pence, or 2.1 percent, to 853.5 pence on the London Stock Exchange. Anglo fell 0.5 percent to 1,876.5 pence, valuing the company at 24.7 billion pounds.

Anglo sought the panel’s ruling as Xstrata continued to seek talks about the plan even after it was rejected. Cynthia Carroll, Anglo’s chief executive officer, said July 31 the proposed “merger of equals” was a “distraction” as she plans to reduce costs and boost metal output.

Xstrata, led by CEO Mick Davis, says the combination would cut annual costs by $1 billion. Anglo has pledged to cut $2 billion of costs by 2011. Davis has completed more than $33 billion of acquisitions in six years.

The Zug, Switzerland-based company may now formalize its original proposal, increase the offer or abandon the deal, the Financial Times said, citing people it didn’t identify.

Xstrata shelved its takeover of platinum producer Lonmin Plc in October last year, before a deadline set by the Takeover Panel for it to either formalize its bid or walk away.

Anglo, founded by German-born Ernest Oppenheimer in 1917, owns about 80 percent of Anglo Platinum Ltd., 45 percent of De Beers and 64 percent of Kumba Iron Ore Ltd.

To contact the reporters on this story: Brett Foley in London at bfoley8@bloomberg.net; Thomas Biesheuvel in London tbiesheuvel@bloomberg.net

Last Updated: October 2, 2009 11:52 EDT