Glencore, Xstrata turn to trusted banking stars

Thu Feb 2, 2012 12:56pm EST
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By Victoria Howley

LONDON (Reuters) - An elite club of bankers traditionally close to London's mining companies stand to earn their firms a share of a $140 million fee pot if the proposed merger between Glencore and Xstrata succeeds.

Banking teams advising Glencore Chief Executive Ivan Glasenberg and Mick Davis of Xstrata can expect payouts of between $50 million to $70 million, according to estimates from Thomson Reuters and Freeman Consulting, for helping their clients pull off the industry's biggest deal to date.

If they fail to gauge a merger premium that will win over Xstrata's full shareholder register, however, they will receive only 10 percent of the potential revenue.

Glencore already owns 34 percent of Xstrata, which means less work for the advisers, but has also capped potential fees 20 to 30 percent lower than an average deal of this size.

Mining group Xstrata and Glencore, the world's largest diversified commodities trader, are in talks over an all-share deal that would create a group worth 50 billion pounds ($79.10 billion).

Both sides have called in tried and tested advisers, who have worked closely with them over the years, sometimes at the expense of lucrative business from the other company.

Glasenberg has called on Citigroup and Morgan Stanley, people familiar with the matter said, two of the bank's that led Glencore's $10 billion IPO in May, which yielded about $300 million to $400 million for advisers involved.

Credit Suisse, also a top bank on the IPO, may be added to the roll call at a later stage, but does not yet have a role, the people said.   Continued...