Glencore already owns 34% of Xstrata and will offer 2.8 new Glencore shares for every Xstrata share held, valuing Xstrata at $61.9 billion and representing a 15.2% premium to Xstrata’s closing price on February 1.
The merged entity, to be known as Glencore Xstrata International, would have a market value of around £52 billion placing it behind BHP and Rio, which have market capitalisations of about $A190 billion and $115 billion respectively.
As previously flagged, Xstrata chairman Sir John Bond will retain his seat in the enlarged company, while Xstrata chief executive officer Mick Davis will be CEO of the new company with Glencore CEO Ivan Glasenberg as deputy CEO and president.
As well as Bond, Davis and Glasenberg, the board will feature a further four directors from each company. Xstrata chief financial officer Trevor Reid will be CFO of the entity with Glencore CFO Steven Kalmin as his deputy.
GXI will be listed in Hong Kong and London and based in Switzerland.
Xstrata is listed on the London and Swiss stock exchanges, while Glencore listed on the London and Hong Kong stock exchanges in May last year following a $10 billion float.
The enlarged company is expected to realise average annual earnings before interest, tax, depreciation and amortisation of $500 million.
Minelife senior resource analyst Gavin Wendt told MiningNews.net last week that a potential merger was a logical fit.
“I think a lot of people were expecting it when Glencore listed that it was going to be the likely outcome and it was just a matter of time really before the two groups got together,” he said.
“It just makes so much sense in terms of their management philosophy, the way the companies are run, the asset exposures … and also for the fact that these days it has certainly been the trend that groups are getting together and getting bigger.
“I think there was a fair degree of ‘we need to get larger’ because BHP is so big and there are obvious benefits to BHP that have materialised since the company got bigger in terms of its market influence.”
Wendt said the merger talks might prompt other major miners such as Anglo American to go on the acquisition hunt.
“Maybe it does put a little bit pressure on them but again I don’t think it is a matter of betting bigger just for the sake of it,” he said.
MNN columnist Dryblower also speculated yesterday that Anglo would be the first target of “Glenstrata” after Xstrata failed in a merger bid for the company in 2009.
In Monday trading in London, Xstrata shares closed 1.7% down to £12.615, while Glencore shares shed 4.5% to £4.607.
