TIDMGLEN TIDMXTA
RNS Number : 9252W
Glencore International PLC
07 February 2012
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION (IN WHOLE OR IN
PART) IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD
CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH
JURISDICTION
NEWS RELEASE
RECOMMENDED ALL-SHARE MERGER OF EQUALS OF
GLENCORE INTERNATIONAL PLC AND XSTRATA PLC TO CREATE UNIQUE $90
BILLION NATURAL RESOURCES GROUP
7 February 2012
Summary
o The Glencore Directors and the Independent Xstrata Directors
have reached agreement on the terms of a recommended all-share
merger of equals
o Creation of a major natural resources group with a combined
equity market value of $90 billion and a unique business model,
fully integrated along the commodities value chain, from mining and
processing, storage, freight and logistics, to marketing and
sales
o Merger ratio of 2.8 New Glencore Shares for every Xstrata
Share held, excluding Xstrata Shares already owned by the Glencore
Group, providing Xstrata Shareholders other than Glencore with a 45
per cent. stake in the Combined Entity
o The Merger values each Xstrata Share at 1,290.10 pence and the
entire issued and to be issued share capital of Xstrata at
approximately GBP39.1 billion ($61.9 billion) and represents a
premium of:
o approximately 15.2 per cent. to Xstrata's closing share price
of 1,119.50 pence as at 1 February 2012, being the last business
day prior to the announcement by Xstrata that it was in discussions
with Glencore; and
o approximately 27.9 per cent. to Xstrata's volume weighted
average share price of 1,008.91 pence over the three-month period
ended 1 February 2012, being the last business day prior to the
announcement by Xstrata that it was in discussions with
Glencore
o Combination of two complementary businesses with long-standing
links and the logical next step for both companies against a
changing industry environment
o Combines the premier global commodities marketing business and
a world-class operator of metals and mining assets, each with
outstanding track records of growth and value creation, and
integrates two portfolios of assets and projects with industry
leading growth prospects and combined production growth of 11 per
cent. on a compound annual basis to 2015
o Combined Group will have a significant and expanded
operational footprint, including positions in the next major
regions for mining investment, including African copper-belt,
Kazakhstan and South America
o Creates substantial new optionality and greater strategic and
financial flexibility
o Combined Group will benefit from enhanced scale and market
positions in the production and marketing of key commodities, as
well as an industry-leading diversification profile by commodity
and which improves cash flow diversification
o Proven management team to be led by current Xstrata CEO, Mick
Davis, as CEO of the Combined Group, Ivan Glasenberg, current
Glencore CEO, as Deputy CEO and President, Trevor Reid, current
Xstrata CFO, as CFO and Steven Kalmin, current Glencore CFO, as
Deputy CFO
o Combined Group will benefit from a robust corporate governance
structure with an aligned strategy to create superior shareholder
value. Sir John Bond, current Xstrata non-executive Chairman, will
be nominated as non-executive Chairman of the Combined Group and
the Combined Group's Board will also include Mick Davis, Ivan
Glasenberg and a further eight non-executive directors, four from
each of Xstrata and Glencore's current Boards
o Glencore and Xstrata management teams will be deployed
according to their key strengths. Operating assets will be
integrated into the existing Xstrata business units, while
marketing will be managed by the existing Glencore management
teams
o Best in class sustainability and operating expertise to be
applied across the Combined Group's operations to underpin access
to natural resources and a social licence to operate
o Estimated annual EBITDA synergies of at least $500 million in
the first full financial year of the Combined Group, predominantly
marketing related
o Expected to be earnings per share accretive to Xstrata
Shareholders in the first full financial year of the Combined
Group(1)
o For the 12 months ended 31 December 2011, Glencore generated
revenues of $186.2 billion and adjusted EBITDA (before exceptional
items) of $6.5 billion(2)
o For the 12 months ended 31 December 2011, Xstrata generated
revenues of $33.9 billion and EBITDA (before exceptional items) of
$11.7 billion(3)
o On a combined basis for the year ended 31 December 2011, the
Combined Group would have generated revenues of $209.4 billion and
adjusted EBITDA of $16.2 billion(4)
o The Merger will be effected by means of a Court sanctioned
scheme of arrangement of Xstrata under Part 26 of the UK Companies
Act, pursuant to which Glencore will acquire the entire issued and
to be issued ordinary share capital of Xstrata not already owned by
the Glencore Group
1. This statement should not be interpreted to mean that
earnings per share for Xstrata Shareholders will necessarily be
greater than those for the year ended 31 December 2011.
2. These figures are unaudited but are extracted from the
Glencore Trading Update in Appendix 4 and include some figures
which are included in the Glencore Profit Estimate. See Appendix 4
for further details.
3. Xstrata's preliminary results for the same period were released today and are available at www.xstrata.com.
4. Combined revenue excludes sales made between Glencore and
Xstrata and combined EBITDA excludes Glencore's equity accounted
share of Xstrata's income.
Xstrata's operating businesses and Glencore's marketing
functions will continue to operate under their existing brands. It
is proposed that the Combined Entity will be called Glencore
Xstrata International plc, listed on the London and Hong Kong Stock
Exchanges, with its headquarters in Switzerland and will continue
as a company incorporated in Jersey.
The Independent Xstrata Directors, who have been so advised by
each of the Xstrata Financial Advisers, consider the terms of the
Merger to be fair and reasonable. Accordingly, the Independent
Xstrata Directors intend unanimously to recommend Xstrata
Shareholders to vote in favour of the Scheme at the Court Meeting
and the resolutions to be proposed at the Xstrata General Meeting
as the Independent Xstrata Directors who hold or are beneficially
entitled to Xstrata Shares have irrevocably undertaken to do in
respect of their own Xstrata Shares (representing approximately 0.1
per cent. of the issued ordinary share capital of Xstrata). In
providing its advice, each of the Xstrata Financial Advisers has
taken into account the commercial assessments of the Independent
Xstrata Directors.
The Glencore Directors consider the Merger to be in the best
interests of Glencore Shareholders taken as a whole. Accordingly,
the Glencore Directors intend unanimously to recommend Glencore
Shareholders to vote in favour of the resolution to be proposed at
the Glencore General Meeting to approve the Merger and related
resolutions as the Glencore Directors who hold or are beneficially
entitled to Glencore Shares have irrevocably undertaken to do in
respect of their own Glencore Shares (representing approximately
16.8 per cent. of the issued ordinary share capital of
Glencore).
Mick Davis, Xstrata plc Chief Executive Officer commented:
"A merger between Glencore and Xstrata offers a unique
opportunity to create a new business model in our industry to
respond to a changing environment. It is the logical next step for
two complementary businesses, each with an outstanding track record
of shareholder value creation, entrepreneurial management and a
proven ability to spot valuable opportunities and capitalise on
them.
"Our industry landscape is evolving ever faster. Sources of
supply are diverging from traditional mining regions to more
complex and disparate locations, with a range of new industry
participants seeking access to markets. At the same time, demand
growth has shifted from Europe, Japan and the US, to emerging Asian
economies. The commodities value chain is becoming longer and more
complex, creating opportunities for a company that can
pre-emptively participate at every stage. Glencore Xstrata would be
well positioned to do just that, creating value from resource
extraction to customer sales and services, at a time when demand
for our combined products continues to grow.
"Increased scale and diversity will improve our risk profile,
enhance access to capital markets and allow us to participate in
industry consolidation. With access to superior market
intelligence, relationships with thousands of suppliers and
customers and the sustainability and operating expertise to operate
in both existing and emerging producing regions, Glencore Xstrata
will be well placed to build a distinct competitive position and
capture new opportunities across the globe.
"The Merger also offers exciting career prospects for both
companies' people within a dynamic, decentralised and
entrepreneurial global corporation. I look forward to discussing
this opportunity with our shareholders over the coming weeks."
Ivan Glasenberg, Glencore Chief Executive, said:
"We have a fantastic opportunity to create a new powerhouse in
the global commodities industry. The merged company will be the
most diverse major resource group, combining two complementary
project portfolios and pipelines with the best commodities
marketing business in the world.
"This is a natural merger which will realise immediate and
ongoing value from marketing the Combined Group's products to
maximise arbitrage opportunities, blending, swapping and storing to
meet customer needs more exactly. But the opportunity is even
greater than that.
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