London Mining Network’s concerns about Glencore and Xstrata involve the companies’ environmental and human rights impacts. But not even all the financial commentators are happy about the proposed merger.
Money Morning says:
Xstrata is a good fit for Glencore. The two firms operate in most of the same areas. What Xstrata digs out of the ground it sells to Glencore, which then flogs the stuff around the world. Xstrata is one of the world’s largest mining and metals firms. It’s a major producer of seven commodities used in everything from making steel, to constructing buildings and delivering electricity to developing jet engines and mobile phones. The combined entity would be the world’s biggest zinc producer with 15% of the market. And it would control 32% of the trade in thermal coal, still a key energy production fuel in China and the US. The merger looks set to be confirmed this week. And investors seem to like the idea. Since Thursday, shares in Xstrata have rocketed 15% while Glencore has jumped up by 12%. So if you have a pension, or maybe a FTSE 100 tracker fund, chances are you’re better off as a result of the merger talks. So why does the deal worry us? Because we don’t think this is a good time to be loading up on commodities. See http://www.moneyweek.com/investments/commodities/glencore-xstrata-merger-marks-top-of-the-market-20600.
Glencore and Xstrata close to takeover
http://www.guardian.co.uk/business/2012/feb/06/glencore-xstrata-takeover-announcement-due
Commodities trader and mining group expected to announced tie-up, with Xstrata taking majority of seats on board The commodities trader Glencore and mining group Xstrata are close to finalising an $80bn (£50bn) tie-up to seal the industry’s largest ever takeover – which could be announced as early as Tuesday. Xstrata, in which Glencore already has a 34% stake, announced last week the two had been in discussion prior to Christmas after years of on-off talks. It is understood a preliminary understanding has been reached on the structure of the top management, according to sources familiar with the deal, with Xstrata expected to take a majority of seats on the board, to keep its chairman – John Bond – as well as its chief executive, Mick Davis, and chief financial officer, Trevor Reid.
Why Xstrata needs to play hard to get with Glencore
http://www.guardian.co.uk/business/nils-pratley-on-finance/2012/feb/02/glencore-xstrata-merger-bargaining
Glencore’s proposed merger with Xstrata: key facts
http://www.guardian.co.uk/business/2012/feb/02/glencore-xstrata-merger-key-facts
See also, from last April:
Glencore: the story behind the $60bn float
http://www.guardian.co.uk/business/2011/apr/14/glencore-story-float?INTCMP=ILCNETTXT3487