The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.
ROME—The pending marriage of Xstrata PLC and Glencore International PLC would create a mining powerhouse with both the muscle and the appetite to quickly gobble up smaller rivals.
Xstrata, which owns Canada’s Falconbridge Ltd., is in talks with part-owner Glencore aimed at an all-stock merger that would reshape the industry by uniting what is already a formidable miner with the world’s biggest commodities trader.
Xstrata said Thursday it was approached by Glencore, which already holds 34 per cent of the Anglo-Swiss miner. If a deal is struck, a giant with a market value of about $88-billion (U.S.) would be created overnight.
Both companies are run by forceful chief executive officers, both are deal-making machines on their own, and together would be a formidable takeover force that analysts believe could target companies whose market value is at least $10-billion. In its own right, it would be huge in zinc, thermal coal, nickel and copper.
“The long anticipated merger of Glencore and Xstrata could set off a new round of consolidation in the mining industry,” TD Securities analyst Greg Barnes said.
The timing of the talks suggests that Ivan Glasenberg, Glencore’s South African-born chief executive officer, is trying to nab Xstrata before its new-project growth spurt potentially ramps up its value. He has coveted full control of Xstrata for several years, though various informal attempts failed to convince Mick Davis, his Xstrata counterpart, to unite the companies.
Mr. Davis also wanted a market value attached to Glencore before a merger was proposed. That happened last year, when Glencore launched a $10-billion initial public offering on the London and Hong Kong stock exchanges.
Details of the proposed merger, confirmed early Thursday, were not available, though analysts believe Glencore will have to pay at least some premium given the fairly substantial synergies, estimated at as much as $700-million, that would be gained in a merger. Xstrata shares rose 10 per cent, reflecting investors’ expectation that a premium, however modest, will have to be offered.
Together, the enlarged company would be the world’s fifth largest mining concern by market value, after BHP Billiton; Vale, which owns Canada’s Inco; Rio Tinto, owner of Montreal’s Alcan Inc.; and China Shenhua Energy, China’s largest coal producer. Anglo American PLC would be sixth.
For the rest of this article, please go to the Globe and Mail website: http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/glencore-xstrata-target-powerhouse-mining-merger/article2323554/