Commodities trader Glencore is in talks to buy mining group Xstrata in an all-share transaction that could create a combined group worth more than £50bn, shaking up the industry with its biggest deal to date.
Glencore, the world’s largest diversified commodities trader, already owns 34 per cent of Xstrata and a tie-up between the two – a deal which would trump Rio Tinto’s $38bn acquisition of Alcan in 2007 – has long been expected, as Glencore aims to add more mines to its trading clout.
“We’ve always had the belief these two companies should be together,” Glencore chief executive Ivan Glasenberg said.
Investors and analysts say the main potential stumbling block, after years of on-off talks, will be the price – the premium, if any, offered to Xstrata shareholders, who are already signalling they want to see the growth profile of their company recognised in any offer, however friendly, and will require a sweetener to approve the move.
Any agreement will also hinge on the relationship between the ambitious South African bosses of both companies – Glencore’s Glasenberg and Mick Davis at Xstrata.
Both sides said there was no certainty an offer would be made. The deal was described as an all-share “merger of equals”. Under UK rules, Glencore now has 28 days to make an offer, though it could be extended at Xstrata’s request.
The two sides have little overlap in mining, meaning a combined ‘Glen-strata’ entity would get synergies from some areas of marketing but would otherwise combine industrial and operational assets to create the world’s largest zinc and thermal coal producer.