Commodities trader Glencore and mining giant Xstrata have confirmed they will merge to create a major natural resources group with a combined equity market value of $90 billion.
The companies said that to combine was the logical next step in a changing industry environment.
The combined entity will have production growth of 11 per cent on a compound annual basis to 2015, with positions in the next major regions for mining investment, including the African copper-belt, Kazakhstan and South America.
Xstrata’s current CEO Mick Davis will become CEO of the combined group, while Ivan Glasenberg, Glencore’s CEO, will become deputy CEO and president. Xstrata’s current CFO Trevor Reid will become CFO and Steven Kalmin, Glencore’s current CFO, will become deputy CFO.
It is proposed that the combined entity will be called Glencore Xstrata International, with its headquarters in Switzerland. Xstrata’s operating businesses and Glencore’s marketing functions will continue to operate under their existing brands.
Mick Davis, Xstrata’s CEO, commented: “A merger between Glencore and Xstrata offers a unique opportunity to create a new business model in our industry to respond to a changing environment. It is the logical next step for two complementary businesses, each with an outstanding track record of shareholder value creation, entrepreneurial management and a proven ability to spot valuable opportunities and capitalise on them.
“Increased scale and diversity will improve our risk profile, enhance access to capital markets and allow us to participate in industry consolidation. With access to superior market intelligence, relationships with thousands of suppliers and customers and the sustainability and operating expertise to operate in both existing and emerging producing regions, Glencore Xstrata will be well placed to build a distinct competitive position and capture new opportunities across the globe.”
Ivan Glasenberg, Glencore’s CEO, said: “We have a fantastic opportunity to create a new powerhouse in the global commodities industry. The merged company will be the most diverse major resource group, combining two complementary project portfolios and pipelines with the best commodities marketing business in the world.
“This is a natural merger which will realise immediate and ongoing value from marketing the combined group’s products to maximise arbitrage opportunities, blending, swapping and storing to meet customer needs more exactly. But the opportunity is even greater than that. Working together, we will be able to provide customers with greater security of supply and a broader range of products and services. We buy from thousands of third-party commodity producers worldwide, and these relationships enable us to spot opportunities to grow our asset base before anyone else.”
He concluded: “Our enhanced scale, diversification and financial flexibility will enable us to capture more of these opportunities if they are right for the combined group.”
