Glencore and Xstrata in $80 billion takeover talks

Thu Feb 2, 2012 12:54pm EST
 
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By Clara Ferreira-Marques and Victoria Howley

LONDON (Reuters) - Commodities trader Glencore is in talks to buy mining group Xstrata in an all-share transaction that could create a combined group worth more than 50 billion pounds ($79 billion), shaking up the industry with its biggest deal to date.

Glencore, the world's largest diversified commodities trader, already owns 34 percent of Xstrata and a tie-up between the two -- a deal which would trump Rio Tinto's $38 billion acquisition of Alcan in 2007 -- has long been expected, as Glencore aims to add more mines to its trading clout.

"We've always had the belief these two companies should be together," Glencore Chief Executive Ivan Glasenberg told a financial conference in Moscow.

Investors and analysts say the main potential stumbling block, after years of on-off talks, will be the price -- the premium, if any, offered to Xstrata shareholders, who are already signaling they want to see the growth profile of their company recognized in any offer, however friendly, and will require a sweetener to approve the move.

But any agreement will also hinge on the relationship between the ambitious South African bosses of both companies -- Glencore's Glasenberg and Mick Davis at Xstrata.

News that Xstrata, the world's fourth-largest diversified miner, had received an approach boosted shares in both companies, sending Xstrata up more than 14 percent and Glencore up over 8 percent.

Both sides said there was no certainty an offer would be made and the deal was described as an all-share "merger of equals." Under UK rules, Glencore has 28 days to make an offer, though that could be extended at Xstrata's request.

The two sides have little overlap in mining, meaning a combined "Glen-strata" would get synergies from some areas of marketing but would otherwise combine industrial and operational assets to create the world's largest zinc and thermal coal producer and a heavyweight in copper and nickel.   Continued...

 
<p>A worker uses a mobile lift to clean the windows of the headquarters of Swiss commodities trader Glencore in Baar near Zurich April 13, 2011. REUTERS/Arnd Wiegmann</p>