Landmark mining deal set to be announced

Posted on February 3, 2012

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written for New Statesman – words by Robert Pollard

Xstrata and Glencore in talks over merger deal.

Xstrata and Glencore, two giant raw materials firms, are in talks over a possible merger that if successful would create a new company potentially worth £50m.

The two Swiss companies have urged caution, claiming talks over an all-share merger of equals may not lead to a deal being completed, but suggestions are that an announcement could be made on Tuesday when Xstrata release its annual results.

If the landmark deal did come to fruition, the possibility of two of the largest mining companies joining forces has already led to talk of a new breed of ‘super-miners’. The new company would offer skills and knowledge in all areas of mining and their combined skill sets would create a powerful new firm and potentially alter the landscape of the industry at large. Many mining professionals are already predicting a sea change across the industry, with rival firms, such as Anglo American and Rio Tinto, expected to alter their strategies in order to keep pace.

It is unclear as to who would assume the role of chief executive, although early suggestions are that Xstrata’s Mick Davis would lead the new firm. Ivan Glasenberg, Davis’ opposite number at Glencore, is expected to fill the deputy role temporarily before moving on to pastures new.

The head of natural resources at Liberum Capital, Michael Rawlinson, claimed the timing of the deal surprised some, saying: “The market is surprised that [Xstrata chief executive] Mick Davis has caved in so quickly [to Glencore]. However, the longer they left it, the less chance Xstrata had to get a premium. In three years’ time, Glencore would have been a seasoned stock with a bigger institutional share register. So there is an argument ‘why not do a deal now and get a small premium”.

Many believe that a merger would mean the liberalisation of both companies, with their combined powers offering the potential for significant progress in the field.

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Posted in: Business