Glencore and Xstrata Begin a New Era

PUBLISHED: May 02 2013 @ 09:52 | Comments (13) | More info about Lou Gutheil

Today is 02 May 2013. What a day it is for the mining industry in general and for Glencore (LSE:GLEN) and Xstrata (LSE:XTA).

As we reported on 16 April, the lengthy process of the merger of Glencore International and Xstrata has been consummated as anticipated. Finally.

The new company, Glencore Xstrata plc, with an estimated market cap of between $69 and $76 billion will begin trading on the London and Hong Kong stock exchanges on 03 May. It will enter the LSE tomorrow as the fourth-largest mining company in the world, competing on a level with BHP Billiton (LSE:BLT), Rio Tinto (LSE:RIO) and Anglo-American (LSE:AAL).

Xstrata shareholders prior to the merger will receive 3.05 shares of Glencore shares for each share held.

A number of top Xstrata executives will be looking for new jobs. First to leave will be Loutjie Smit, interim CEO of Xstrata alloys, along with Ian Pearce, the head of Xstrata nickel and Charlie Sartain, the head of Xstrata copper. The Wall Street journal expects hundreds more will follow.

Glencore CEO, Ivan Glasenberg, will remain as the CEO of the new company whilst Xstrata Chairman, Sir John Bond, will assume the same position with the new mining giant. Mick Davis, former Xstrata CEO, is expected to remain in a consulting capacity for about two months. Thras Moraitis, Executive General Manager of Corporate Affairs; Benny Levene, Chief Legal Counsel and Trevor Reid, CFO, will also remain with the company on a consulting basis for another six months or less.

Over a year of headlines and speculation is now over. The Glencore Group must now begin the process of actual restructuring, maximizing synergies and eliminating redundancies and inefficiencies. The company must also divest its Las Bambas copper project in Brazil under terms of the agreement. It is safe to infer that the board has a plan well-conceived and ready to implement.

After nearly 15 months of drama, it will be interesting to see what lies ahead.

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