Mining giants Glencore and Xstrata agree $90bn merger deal

 

Mining heavyweights Glencore and Xstrata have unveiled a deal to create the world's fourth largest natural resources firm worth 90 billion US dollars (£57 billion).

The pair - among the top 20 firms on the London stock market - will have operations in 33 countries and should be better able to compete against bigger rivals BHP Billiton and Rio Tinto if the merger is backed by shareholders.

Glencore, the world's biggest commodities trader, with products including oil, coal, gold and foodstuffs, has been circling Xstrata for a number of years and has already built up a 34 per cent stake in the company.

Last year, Glencore became the first company in 25 years to be fast-tracked into the FTSE 100 Index in London's largest ever flotation.

Anglo-Swiss firm Xstrata is the world's largest exporter of thermal coal and also produces copper, nickel and zinc. Its shareholders will have a 45 per cent stake in the proposed new firm.

Glencore chief executive Ivan Glasenberg said: "We have a fantastic opportunity to create a new powerhouse in the global commodities industry."

Mr Glasenberg will be deputy chief executive in the new firm, with the top job going to current Xstrata boss Mick Davis.

The planned deal values Xstrata at 39.1 billion US dollars (£24.8 billion) and represents a 15.2 per cent premium on its share price on February 1, the day before the pair confirmed talks over a potential tie-up.

It was not long before the announced merger sparked concern with one major institutional investor - Edinburgh-based Standard Life Investments, which holds around 63.3 million shares in Xstrata, or 2.15 per cent of the total.

The company said it would vote against the merger plans unless terms of the deal are improved, as it currently undervalues Xstrata's assets.

David Cumming, head of equities at Standard Life Investments, said: "Although we see some merit in the merger of Xstrata and Glencore, the proposed exchange ratio clearly undervalues Xstrata's assets and future earnings contribution.

"Consequently it is our intention to vote against the deal unless the merger terms for Xstrata shareholders are materially improved."

The move echoes concerns of shareholders in security group G4S, which last year resisted a proposed multibillion-pound takeover of a Danish cleaning firm.

G4S scrapped the move - just two weeks after it was announced - after shareholders raised concerns over the scale of the takeover amid an uncertain economic climate.

PA

Start your day with The Independent, sign up for daily news emails
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Life and Style
techPatent specifies 'anthropomorphic device' to control media devices
Voices
The PM proposed 'commonsense restrictions' on migrant benefits
voicesAndrew Grice: Prime Minister can talk 'one nation Conservatism' but putting it into action will be tougher
News
Ireland will not find out whether gay couples have won the right to marry until Saturday afternoon
news
News
Kim Jong-un's brother Kim Jong-chol
news
News
Manchester city skyline as seen from Oldham above the streets of terraced houses in North West England on 7 April 2015.
news
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine
Letterman's final Late Show: Laughter, but no tears, as David takes his bow after 33 years

Laughter, but no tears, as Letterman takes his bow after 33 years

Veteran talkshow host steps down to plaudits from four presidents
Ivor Novello Awards 2015: Hozier wins with anti-Catholic song 'Take Me To Church' as John Whittingdale leads praise for Black Sabbath

Hozier's 'blasphemous' song takes Novello award

Singer joins Ed Sheeran and Clean Bandit in celebration of the best in British and Irish music
Tequila gold rush: The spirit has gone from a cheap shot to a multi-billion pound product

Join the tequila gold rush

The spirit has gone from a cheap shot to a multi-billion pound product
12 best statement wallpapers

12 best statement wallpapers

Make an impact and transform a room with a conversation-starting pattern
Paul Scholes column: Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?

Paul Scholes column

Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?