Shares in Glencore Xstrata shot up 4 per cent on the newly formed commodities empire’s first full day of trading as a single entity.
Investors have been eagerly awaiting the long-mooted creation of the world’s fourth biggest miner, a deal that was completed on Thursday. This anticipation showed as investors gobbled up stock in a company whose shares debuted at 334p, valuing Glencore Xstrata at more than £44.5bn. It closed at 343.95p, a rise of 12.8p from Thursday’s closing price.
The share hike validated Ivan Glasenberg’s ambition to reunite the two companies: Xstrata span out of the wheat-to-nickel trader Glencore as a collection of coal assets over a decade ago. The proposal was initially a merger, but Mr Glasenberg’s Glencore ended up in effect taking over Xstrata.
The South African billionaire is now chief executive of the merged group, which wooed investors yesterday with news that the $500m (£320m) of savings expected to be made from bashing the two companies together would be “comfortably met”.
Glencore Xstrata has vowed to cut costs, sell unneeded assets and give any spare cash to shareholders. Mr Glasenberg said that the $500m savings figure had not included overheads that it can cut out of Xstrata, leading analysts at Jefferies to estimate that the final figure could be more than $1bn.
In further proof that Glencore is the dominant party in this deal, 12 of the 14 top divisional jobs have been taken by Glencore executives. Xstrata’s Peter Freyburg and Mark Eames will run coal and iron ore mining respectively.
Mr Glasenberg has also launched a 100-day review of Xstrata’s mines and plants, expected to lead to the sale of projects where costs have greatly increased recently. However, he insisted: “We are not desperate to sell assets. Glencore will not be selling assets at the wrong time in the cycle.”
Glencore is also closing Xstrata’s main corporate offices in London and the Swiss canton of Zug.