Glencore, Xstrata sign giant $90 bn merger

Caribbean Herald Tuesday 7th February, 2012

NEW YORK Mining giant Xstrata and Glencore, the world's biggest commodity trader, have announced a $90 billion all-share merger to create the world's fourth largest natural resources company.

The joint entity to be called Glencore Xstrata International will be headquartered in Switzerland, where both firms have their home base.

Under the deal, Xstrata shareholders are to get 2.8 Glencore shares for each share they hold.

The combined new business will be valued at $90 billion, of which Xstrata would comprise $39 billion.

Glencore shareholders are to own 55 per cent of the combined group in the "merger of equals", while Xstrata shareholders will own the rest of the new company.

Glencore, which owns 34 per cent of Xstrata, is to buy the remaining 66 per cent of Xstrata for $41 billion.

Xstrata chief executive Mick Davis will head the new firm, while his compatriot in Glencore, Ivan Glasenberg, will be deputy chief executive.

However, in a jarring note, two major Xstrata shareholders said they would vote against the deal as it undervalues their shares.

Standard Life Investments and Schroders, which between them own 3.6% of Xstrata, opposed the deal, saying it undervalued the firm and they would vote against the merger.

Xstrata is the world's fourth-largest copper producer and has major stakes in zinc and nickel mining. The company employs 70,000 people in 20 countries. In 2011, it reported net profit of $5.7 billion on $34 billion in revenue.

Glencore, a Swiss company, employs 60,000 people in at least 40 countries, and has interests in a variety of metals and minerals, as well as oil, coal and agricultural commodities.

The new company is aimed to create a rival to mining heavyweights such as BHP Billiton and Rio Tinto. However, the deal needs to be approved by 75 per cent of shareholders.