In a historic decision Xstrata and Glencore International have agreed to a merger forming a new company with a market value of $90 billion.
The Swiss giant and the commodities dealer have been negotiating the deal for some time now. It is finally been admitted in public that they are going to form the world’s fourth largest natural resources group with this merger.
The code name of the secret merger talks was “Everest ” and they have been on for some years now. Glencore International already has a 34% stake in the mining company Xstrata. Under terms of the deal made the Xstrata shareholders would receive 2.8 Glencore shares for each of their shares. That represents a premium of 15.2% based on Monday's closing prices at the stock exchange. Some big shareholders of Xstrata are not too pleased with the deal and plan to oppose it even now.
Xstrata Chief Executive Mick Davis is to be the new Chief Executive Officer for the combined entity which is going to save $ 500 million in the first year itself in operating costs. Mick Davis said that the commodities value chain is becoming longer and more complex, creating opportunities for a company that can pre-emptively participate at every stage.
Mr Davis added that Glencore Xstrata would be well positioned to do just that, creating value from resource extraction to customer sales and services, at a time when demand for their combined products continues to grow. The company will have under its aegis a chain of businesses from mining to refining, storage and shipping of basic commodities like coal, copper and corn.
Glencore CEO Ivan Glasenberg is hoping that the merger will be completed in the third quarter of this year as long as all approvals come through. He is to be the deputy CEO and president of the new formed company. He said that the merger was a fantastic opportunity to create a new powerhouse in the global commodities industry.