James Moore: Investors had better hope the 'big men' get on if Glencore and Xstrata merge
Outlook: Was there a little extra steam emanating from the top of Canary Wharf's towers yesterday? Yes, there is a deal on the horizon, and not just any deal. A mega-deal of the type that has become very rare recently.
The City is not usually all that keen on nil-premium mergers, but it cheered commodity trader Glencore's tentative plans to hook up with Xstrata, the mining company, from the rafters.
The shares of both companies vaulted towards the top of the FTSE 100's leaderboard as bankers fell over themselves to grab a piece of the pie: "What, you can only make me joint third bookrunner? OK, OK, anything. I'll be joint third tea-boy if you want. Just get me on that blasted tombstone!"
With up to £90m in fees up for grabs, it's no wonder.
Will shareholders, at least those unconnected to the two companies by virtue of employment in some fashion, be similarly rewarded? That's a harder question to answer in the cold light of day.
Glencore floated at the top of the market in a move widely seen as enabling its chief executive, Ivan Glasenberg, pictured, and some of his colleagues to cash out. It also provided the company with a valuation (the lack of which has hindered past attempts at a deal with Xstrata). Said valuation having been on the skids pretty much since the company's shares made their debut in London.
Glencore faces a dilemma. The commodities boom has slowed, not least because of the slowing of the world economy and, especially, China. It is hard to see Glencore's shares recovering anytime soon and, with its dominant position in commodity trading already entrenched, it is also quite difficult to see where the growth is coming from.
Standard practice for companies in this sort of position is to look for deals. Indeed Mr Glasenberg said when he floated that he was doing just that. Aggressively.
The two companies have actually been flirting for quite some time. Glencore already owns a big chunk of Xstrata and was instrumental in its creation about a decade ago when Xstrata's boss, Mick Davis, bought Glencore's coal mining business. The latter handles a lot of Xstrata's products and still has mines of its own that Xstrata might make a better fist of managing.
Trouble is, who's going to run the show? Mr Glasenberg or Mick the miner. They certainly know each other well and their headquarters are only a couple of miles away from each other in Switzerland.
In more normal mergers one boss stays and one goes, his pockets laden with pay off. That can't happen with this one. But accommodating two such "big men" who dominate their respective companies won't be easy. Whatever their titles, you will end up with co-chief executives.
The City has its eyes on the numbers, gushing about the cost synergies of up to $700m (£442.4m) a year and the prospect of the creation of a predatory giant that will frighten the life out of its competitors. The prospect of the two companies' bosses not getting on when they have to work together ought to frighten the life out of shareholders.
- 2 Rarest Beanie Baby of them all could be sold for £62,500 on eBay
- 3 Professional big game hunter Ian Gibson crushed to death by elephant during hunt
- 4 Farmer told to tear down mock-Tudor castle after hiding construction behind hay bales
Migrants crossing the Mediterranean: Pope Francis joins calls for EU action on boat refugees
Yemen crisis: Meet the child soldiers recruited by the Shia Houthi rebels who have forsaken books for Kalashnikovs
Alan Rickman admits editing 'terrible' script with friends in Pizza Hut behind backs of writers on Robin Hood: Prince of Thieves
Rarest Beanie Baby of them all could be sold for £62,500 on eBay
Isis in Afghanistan: Group claims responsibility for Jalalabad suicide bombing that killed 35
The only black face in the Ukip manifesto is on the page about overseas aid
If I’m being racially abused I don’t need a stranger with a saviour complex to rescue me
Ukip is the only main political party to not address LGBT rights in its manifesto
Food banks: One million Britons will soon be using them, according to Trussell Trust
BBC election debate: The one photo that summed up the whole 90-minute leaders debate
Religion isn't growing, it is becoming vigorous in its demise, says philosopher AC Grayling
iJobs Money & Business
£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...
£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...
£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...
£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...