Glencore, Xstrata Merger on Epic Scale (GLNCY, XSRAY, BHP, VALE, RIO)
Last week’s announced $88 billion merger of Glencore International AG (OTC: GLNCY) and Xstrata plc (OTC: XSRAY) has been on the back burner for a long time. Perhaps the biggest reason for Glencore’s 2011 IPO was to build a war…
Last week’s announced $88 billion merger of Glencore International AG (OTC: GLNCY) and Xstrata plc (OTC: XSRAY) has been on the back burner for a long time. Perhaps the biggest reason for Glencore’s 2011 IPO was to build a war chest that would allow the trading house to make an offer for control of Xstrata, of which it owned about 34% at the time of the IPO. And the offer had to be one that Xstrata’s shareholders could not refuse.
Under terms of the deal, Gencore shareholders would own 56% of the combined companies, and would create a mining and trading company to rival BHP Billiton plc (NYSE: BHP), Vale SA (NYSE: VALE), and Rio Tinto plc (NYSE: RIO).
The most significant potential threat to the deal is the Xstrata shareholder vote. Glencore will not be able to vote its 34% of stock, and the remaining Xstrata shareholders have to approve the merger by a 75% margin. Thus, about one-sixth of Xstrata’s shareholders can block the merger.
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Paul Ausick has been writing for 247Wallst.com for more than a decade. He has written extensively on investing in the energy, defense, and technology sectors. In a previous life, he wrote technical documentation and managed a marketing communications group in Silicon Valley.
He has a bachelor's degree in English from the University of Chicago and now lives in Montana, where he fishes for trout in the summer and stays inside during the winter.