XSTRATA'S board has recommended a $US33 billion ($31.8b) all-share
merger with Glencore, paving the way for the creation of a massive
mining and commodities trading company.
After seven months of haggling, the board recommended that
shareholders vote in favour of Glencore's improved offer, after
gaining assurances about the combined company's board and decoupling
approval of incentive payments from a vote on the offer.
''We have decided to decouple the resolutions to approve the merger from
the resolution to approve the revised management incentive
arrangements,'' Xstrata's chairman John Bond said last night.
This will "enable shareholders to vote in line with their convictions"
without influencing their voting on the Glencore combination, he said.
The combination of the two commodity giants, five years in the making,
would couple Glencore's global trading operations with Xstrata's coal,
copper and zinc mines to create the world's fourth-largest mining
A successful acquisition would be the second-largest in the
mining industry, after Rio Tinto's $US38 billion purchase of Canada's
Alcan in 2007.
Last month, Glencore raised its offer from 2.8 of its shares for each
of Xstrata's to 3.05, after investors said the original bid undervalued
The updated terms are to be sent to shareholders in October and the
companies said they expect shareholders to vote on the merger so the
companies can combine before the end of the year.
WHAT DOES THIS MEAN XSTRATA will now follow another direction. Wandoan will be reviewed along with all other XSTRATA Mining projects. Check your town and subscribe to XSTRATA and ask them what they will be doing in your town now that the new ownership takes over. What is GLENCORE plans for XSTRATA? The deal will happen by the end of this year and expect changes Next Year.
The proposed merger would create a global mining and commodities
player that will compete with the big boys. With physical mining assets
and a solid commodities trading house, Glasenberg is looking to rival
the likes of Rio Tinto, BHP Billiton,
With negotiations going on for months, the deal will also
result in juicy fees for the investment banks involved, which include
Citigroup, Morgan Stanley, Deutsche Bank, JPMorgan Chase, Goldman Sachs,
Nomura, and Barclays.
With the backing of the board, and Davies’ decision to step down
after six months, the road is paved for a completion of this eternal
Xstrata’s board expects it to close by year’s end, and then will
have to navigate anti-trust and regulatory waters across the globe.
While starved investment banks are eager to close this one, and
Glasenberg prepares himself to lead a whole new monster, it’s the
Qataris that will have the final say. All eyes, then, are now turned to
Factbox: Glencore and Xstrata
Reuters) - Here is a look at Glencore, the
world's largest diversified commodities trader, and mining group Xstrata
<XTA.L> which finally gave its blessing to a revised bid from
Glencore on Monday <GLEN.L>.
DEAL: A revised proposal from Glencore, which already owns 34 percent
of Xstrata, was made last month for 3.05 Glencore shares for every
Xstrata share held. At current prices, that is worth around $33 billion,
making it the biggest takeover in the industry since Rio Tinto's
<RIO.L> acquisition of Alcan.
The previous offer ratio was 2.8. Qatar, Xstrata's second-largest investor, had demanded 3.25.
combined group would rank as the world's fourth-largest diversified
natural resources group, with operations from oil wells and mines to
logistics and sales.
THE BIDDER: GLENCORE
Founded as Marc Rich + Co. in 1974, it became Glencore in 1994 when
Marc Rich sold his stake. Headquartered in Baar, Switzerland, Glencore
employs close to 3,000 people in its marketing operations and 58,000
people in 33 countries in its industrial operations.
Glencore's net profit for the first half of 2012 dropped 26 percent to
$1.81 billion, putting the miner on track to match its 2011 full year
result. Its trading business contributed 44 percent of operating profit
in the six months, with the remaining income coming from its industrial
assets, mines to oil wells.
- Business Segments: Metals and Minerals, Energy Products and Agricultural Products
- Major Shareholders:
Ivan Glasenberg 15.92 percent
Daniel Francisco Maté Badenes 6.03 percent
Aristotelis Mistakidis 5.99 percent
Tor Peterson 5.29 percent
Alex Beard 4.63 percent
THE TARGET: XSTRATA:
The roots of Xstrata date back to 1926 when Swiss infrastructure
investment company Südelektra AG was founded. The company was renamed
Xstrata AG in 1999. Xstrata plc was created through a flotation on the
London Stock Exchange in March 2002, when it simultaneously bought $2.5
billion of Glencore's coal assets.
- Xstrata operates in more than 20 countries and employs around 70,000 people globally.
Xstrata, one of the world's largest producers of copper and thermal
coal, reported a 31 percent fall in first-half profits, despite spending
cuts that helped it to offset increasing wages and higher costs of
materials and fuel.
earnings before interest, tax, depreciation and amortization (EBITDA)
for the first six months of 2012 were just over $4 billion. Operating
profit dropped 42 percent to $2.45 billion.
Operating profit at the copper unit, which normally accounts for almost
half of group profit, virtually halved in the first six months of 2012,
as Xstrata shifts to a newer generation of mines.
- Major shareholders
Glencore International AG 33.65 percent
Qatar Holding LLC 11.64 percent
BlackRock, Inc 4.51 percent
Norges Bank 2.93 percent
Sources: Reuters/Company Websites/http://investors.morningstar.com (Reporting by David Cutler, London Editorial Reference Unit)
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Some links if still want to read more:
How Glencore and Xstrata nailed the $76bn deal THIS ONE IS GREAT READING