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Glencore, Xstrata tie-up would create $90 billion giantBy Aaron
Smith@CNNMoneyInvestFebruary 10, 2012: 11:49 AM ET
Swiss company Glencore is in the process of acquiring Xstrata,
shown here at one of its mining operations in Australia.
NEW YORK (CNNMoney) -- In a huge consolidation of the
international mining industry, Swiss company Glencorenternational
has agreed to acquire rival Xstrata in an all-stock deal, according
to a joint statement.
The combined firm -- to be named Glencore Xstrata International
-- would have a market value of $90 billion and beheadquartered in
Switzerland, where both firms currently maintain their home
base.
Under the terms of the deal, Xstrata shareholders would receive
2.8 Glencore shares for each share they hold. Thecompanies said the
price marks a 15% premium over the value of Xstrata shares on Feb.
1, when talk of the deal firstsurfaced.
Glencore is Xstrata's largest shareholder, with a 34% stake.
Once the deal is completed, Xstrata shareholders will contro45% of
the combined company.
Xstrata (XSRAF) is the world's fourth-largest copper producer
and one of the largest zinc and nickel miners. The companwhich
employs 70,000 people in 20 countries, reported 2011 net profit of
$5.7 billion on nearly $34 billion in revenue.
By comparison, Glencore ( ) employs nearly 60,000 people in at
least 40 countries, with interests in a variety ofmetals and
minerals, as well as oil, coal and agricultural commodities such as
wheat, corn, oil seeds and sugar.
Glencore preliminarily reported 2011 revenue of $186 billion;
final results for the year are scheduled to be released nextmonth.
Glencore went public last May, and its stock is listed on London's
FTSE 100 ( ) and in Hong Kong.
Xstrata (XSRAF) is traded on exchanges in London and Zurich.
Xstrata's current chief executive, Mick Davis, would become CEO
of the combined group, while Ivan Glasenberg, thecurrent CEO of
Glencore, would be the deputy CEO and president.
M&A 2012: The year of the hostile takeover
t's not clear how many regulatory hoops the two companies may
need to jump through before the deal comes to fruition.
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8/9/2019 Glencore, Xstrata Announ...k Merger - Feb. 7, 2012
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And minority shareholders may also not be keen to sign on.
According to news reports, shareholders had hoped for a
sweeter deal than what Glencore is offering.
Charl Malan, a senior metals and mining analyst for Van Eck
Global, said the deal would likely close during the third
quarter. While the merger would create a commodities giant,
Australian mining giant BHP Billiton ( ) would remain
argest competitor, he added.
But the merger could change the mining industry landscape in
Africa. Xstrata has a heavy presence in South Africa while
Glencore is active in Zambia and the Democratic Republic of
Congo. The merger could create a "wake up call" to the rest
the industry to ramp up their presence on the continent,
suggested Malan.
Shares of other rival miners were mixed Tuesday, with Rio Tinto
( ), BHP Billiton, Southern Copper ( ) and
Freeport McMoRan Copper & Gold ( , Fortune 500) mostly lower
in midday trading.
First Published: February 7, 2012: 7:25 AM ET
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