UPDATE: Xstrata, Glencore To Create $90 Billion Commodities Giant
February 07 2012 - 3:00AM
Dow Jones News
Anglo-Swiss miner Xstrata PLC (XTA.LN) Tuesday formally
announced plans to merge with commodities titan Glencore
International PLC (GLEN.LN) to create a $90 billion,
sector-straddling giant.
The new company, to be called Glencore Xstrata International
PLC, will have the scale to produce and or trade natural resources,
including metals, oil, and grains, in five continents and together
would have generated revenues of $209.4 billion in 2010.
Xstrata said the terms of the deal will see investors receive
2.8 Glencore shares for every Xstrata share owned, reflecting a
premium of 15% on Xstrata's share price before the deal was
announced. The deal will give Xstrata shareholders other than
Glencore, which already has a 34.4% stake in the miner, a 45% stake
in the combined group.
Shares in Xstrata fell slightly in early Tuesday trade, and
Glencore shares rose, suggesting investors see the premium as being
on the light side.
"The commodities value chain is becoming longer and more
complex, creating opportunities for a company that can
pre-emptively participate at every stage," Xstrata Chief Executive
Mick Davis said in a statement. "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."
Xstrata estimated annual Ebitda synergies of at least $500
million--"predominantly marketing-related"--in the first full
financial year for the combined group.
The company will have "a unique business model, fully integrated
along the commodities value chain, from mining and processing,
storage, freight and logistics, to marketing and sales," Xstrata
said in a statement.
Xstrata's Davis will become chief executive for the combined
group, while Glencore CEO Ivan Glasenberg will become deputy chief
executive and president. Trevor Reid, current Xstrata chief
financial officer, will take the same role in the new group and
Steven Kalmin, Glencore's current CFO, will become his deputy.
Xstrata Chairman Sir John Bond will be nominated as
non-executive chairman for the merged group.
Under the new structure, operating assets will be integrated
into the existing Xstrata business units, while marketing will be
managed by the existing Glencore management teams, reflecting "key
strengths," Xstrata said.
It is proposed that the combined group will be listed on the
London and Hong Kong stock exchanges, with headquarters in
Switzerland, and it will continue as a company incorporated in
Jersey.
Also Tuesday Xstrata said its full-year net attributable profit
increased 12% to $5.8 billion, above expectations of $5.66 billion
according to a Factset survey of 10 analysts.
-By Rhiannon Hoyle, Dow Jones Newswires; +44 (0)20 7842 9405;
rhiannon.hoyle@dowjones.com
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