Massive Merger Creates World's "#1 Mining Predator"
Commodities trader Glencore (LON: GLEN) and mining company Xstrata (LON: XTA) are working toward a merger, which would create the world's "number one mining predator".
The companies would make a pretty neat match—their merge would put them in the global lead in exporting coal and producing zinc, as well as close to the top in copper mining.
Analysts expect the merger to be worth roughly $80 billion, though neither company has released specifics on the deal.
But officials have expressed positive outlooks. Glencore CEO Ivan Glasenberg told The Telegraph:
“We’ve always had the belief these two companies should be together.”
And both company heads seem to be on good terms. Many expect Xstrata CEO Mick Davis to take over, though others believe he’d only be in charge for a short time before turning the merged company over to Glasenberg.
Currently, Glencore owns a 34% stake in Xstrata. Once combined, analysts expect the new company would be 57% owned by Glencore shareholders.
And while Glencore will hold the majority shares, the assets will come from Xstrata. Analysts believe 64% of the merged companies’ assets will be Xstrata’s.
The new company would have 30% of its efforts in copper production. 28% would be coal, 14% zinc, and 2% oil. 28% of the company would be the trading sector, coming from Glencore.
There has also been speculation that the merger would lead to an investment in iron ore.
The iron ore sector is currently dominated by Vale, Rio Tinto, and BHP Billiton, but Xstrata has expressed interest in entering the field, and the merger might give it the power to do so.
The merger announcement had a positive effect on both companies. On Friday, Glencore was up 2.82% to $474.71. Xstrata jumped to $1,280.+2
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