Glencore seals mining mega deal

Ivan Glasenberg

A multibillion-pound natural resources giant has been created after Glencore's takeover of Xstrata sealed the biggest mining deal in history.

Shares in the vast mining and commodities group - called Glencore Xstrata - will begin trading on the London Stock Exchange on Friday, valuing it in the region of £42 billion
The deal brings together Glencore's commodities trading expertise and Xstrata's mining clout to form a group which is expected to compete better against the might of miners BHP Billiton and Rio Tinto.

The takeover creates a group with more than 190,000 staff and over 150 mines and production sites in more than 50 countries, headed by Glencore boss Ivan Glasenberg and with its headquarters in Switzerland.
Charles Stanley analyst Tom Gidley-Kitchin said Glencore's commodities trading expertise will give the group a buffer against commodities price turbulence, amid fears over slowing growth in China.

He said: "It will provide a very different business model to Rio Tinto and BHP Billiton. It should be a much more defensive stock than the other super majors because the trading business is driven by volatility of metal prices, not the absolute level. In one sense the market has been moving Glencore's way."

He added that while the rest of the sector is in "lock-down mode" over acquisitions, Glencore is likely to continue doing small deals, such as investment in oil and gas or expansion in Kazakhstan.

Anglo-Swiss firm Xstrata is the world's largest exporter of thermal coal and also produces copper, nickel and zinc. Glencore is the world's biggest commodities trader.

Xstrata's shareholders only backed the deal as long as a controversial £227 million pay deal for the group's top managers was not included. Xstrata chief executive Mick Davis also stood aside from the top role, but will stay on as a consultant until the summer. The merger also won the backing of regulators in Europe, China and South Africa.

A report said Glencore is likely to begin by culling hundreds of senior Xstrata managers. The Times said Glencore will begin by "trimming the fat" to earn savings of 500 million US dollars (£320 million) a year. Analysts also expect the group to slim down by putting large greenfield developments on the back-burner, although they believe it will continue to be active in the deals market. Glencore declined to comment on possible job cuts.

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