Glencore, Xstrata making progress on international mega-merger

Shareholder documentation relating to the proposed merger of Glencore International plc, a major coal producer and marketer, and Xstrata plc, a major coal producer, was published by the companies on May 31.

Glencore and Xstrata, which produce and market other commodities besides coal, announced their merger plan in February. Xstrata will hold shareholder meetings on July 12 to approve the merger “scheme” and the related retention provisions for senior Xstrata managers.

“The Scheme will give effect to the proposed merger of the two companies and the governance and management arrangements which are key to its success,” said Xstrata in a May 31 statement. “These arrangements depend upon retaining the core senior management of Xstrata, given that more than 80% of the Combined Group’s income will be derived from its operating assets, and are the reason why the retentions were provided for as part of the transaction.  As a consequence the resolutions approving the Scheme and the retention provisions are inter-conditional and, accordingly, the Merger will not be implemented if the retention arrangements resolution is not approved. Glencore will hold a shareholder meeting on 11 July 2012 to approve the Merger and a resolution to change the company’s name to Glencore Xstrata plc.”

Sir John Bond, Xstrata plc Chairman, said: “The strategic logic of combining Glencore and Xstrata is compelling. The merger brings together two highly successful and entrepreneurial management teams to form a major, integrated natural resources group. The Combined Group will be optimally positioned to succeed in a changing industry landscape, unlocking value along the entire value and distribution chain from operation to customer, while offering globally diverse customers a reliable, tailored and efficient supply of commodities.”

Xstrata said the European Union merger control approval process is progressing well and antitrust filings have been submitted or are in the process of being formally submitted with other relevant authorities. Xstrata and Glencore continue to expect to receive all relevant merger approvals to enable merger completion in the third quarter of 2012.

Xstrata is one of the top five global producers of copper, thermal and metallurgical coal, ferrochrome, zinc and nickel, and it also produces silver, lead, platinum, gold, cobalt and vanadium. Founded in 2002 and headquartered in Switzerland, Xstrata operates in over 20 countries.

Xstrata, among other things, is developing a major export coal mining project in western Canada on coal reserves obtained over the last year in separate transactions. Xstrata is also a one-third owner of the rapidly-expanding Cerrejon coal mine in Colombia, while Glencore owns the expanding Prodeco coal mining operation in Colombia. This potential consolidation of Colombian coal production through the Xstrata-Glencore merger is of interest to power generators along the U.S. Atlantic and Gulf coasts that rely on Colombian coal production now, and are increasingly likely to do so in the future as Central Appalachia coal output continues to decline.

Glencore is a public company, listed in London and Hong Kong, registered in Jersey, and headquartered in Baar, Switzerland. The company, founded on commodities trading and with an increasing role in commodities production, has a global network of 50 offices in 40 countries throughout Europe, North, Central and South America, the CIS, Asia, Australia, Africa and the Middle East.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.