The world’s biggest diversified commodities trader, Glencore is in touch with the world’s fourth-largest diversified mining group Xstrata for an all-share deal which might make a combined group of over $79 billion, making it the biggest deal of the industry to date.
Glencore already has 34 percent shares of Xstrata.
Any deal will depend on the rapprochement between the South African bosses of both organizations — Mick Davis of Xstrata and Glasenberg of Glencore. Reports of the deal caused 8% rise in price of shares of Glencore and 14% rise in price of shares of Xstrata.
The deal if materialized would produce the world’s biggest thermal coal and zinc producer as well as a conglomerate of nickel and copper. Any kind of agreement would mean that Glencore’s Glasenberg and Xstrata’s Mick Davis together with shareholders of Xstrata would have to agree on main stumbling block of valuation which means what premium Glencore will be required to pay. Mick Davis as well as his newly appointed Chairman John Bond is expected to oppose any kind of contract which does not take into account Xstrata’s growth potential. Even though a shareholder, Glencore would not have the right to vote.Previous Post » Glencore and Xstrata Talk Merger