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Glencore and Xstrata discuss merger to create $90bn miner

February 02, 2012 - 12:12 GMT Location: London

KEYWORDS: Glencore , Xstrata , merger , all-share , Anglo American , South Africa , copper , nickel , zinc

The combination of Glencore and Xstrata, if a merger went ahead, would create a company with a value of between $80 billion and $100 billion and could trigger further consolidation in the mining industry.

Xstrata said in an announcement on Thursday February 2 it had received an approach from Glencore regarding “an all share merger of equals, which may or may not lead to an offer being made by Glencore for Xstrata”. A deal could lead to further mergers and takeovers in the sector, as other miners looked to match the size and market reach of a new rival, and its peers, such as BHP Billiton and Rio Tinto, could look to restore their lead, analysts told Metal Bulletin. The combination of Xstrata and Glencore, which already owns a 34.5% stake in the former, would create a company with mined production of 1.23 million tpy of copper, 1.54 million tpy of zinc and 315,000 tpy of lead, according to Metal Bulletin’s calculations. Glencore’s stake in Xstrata, and the deals under which it markets material for the mining company, have meant that the potential merger...

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Comment & analysis

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Seven days is a long time in the investment world, but last week must have felt longer than most.
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BHP Billiton is one of the poster children for the commodities super-cycle: a mining company whose immense upstream assets in copper and iron ore have fed the industrialisation of China since the early years of the 21st century and enabled it to return $52 billion to shareholders between 2001 and 2011.
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So, here we go again. Another bank, another huge trade gone bad. This one doesn’t even appear to have been a case of rogue trading; a whole desk seems to have been operating with the full knowledge of the management and/or risk committee.