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Glenxstra heralds a new bottom for deal premium | Deal Insight

As twoof the world’s biggest commodities megalith’s get together to combine under one roof., strains are imminent as a $20 mln payday for Xstrata CEO Mick Davies and his likely taking over the combined Company as CEO , smells of a calm before the storm. Speculation is likely on why the two firms are okay with such a smal ldeal premium and whether it is Mick Davies payday that has enabled the tame acquiescence by the acquiree Xstrata and the CEO position for Mick Davies even as Ivan Glasenberg joins as his Deputy

Deutsch: Logo von Glencore

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Even as ECB enjoyed a rare holiday only buying EUR 200 mln worth of bondslast week, the Greek crisis unlikely to flare up is simmering without a deal on the backburner and the mega deal which seemed rife for only idle speculation for some days has come to a head in barley 24 hours, giving cause to one’s belief that another fracture is due in a few days. The earlier signature deal in the sector that of BHP and Billton was also for a few billions more as Xstrata investor of 34% Glencore looks to instate Xstrata’s John Bond as Chairman and Trevor Reid as CFO with Mick Davies  in the interests of effective integration

The combined company will be worth $80 billion and as such would cost Glencore another $15 -$20 bln in stockswaps for a quick combination

Each Xstrata share is worth 2.8 Glencore listed shares as per the current draft, to be announced alongwith Xstrata results on Tuesday that gives Glencore 56% int he combined mining corporation and enables the seemingly egotistical Mick Davis as the bvoss with Tony hayward from BP being appointed a Senior Independent Director. Erstwhile Xstrata managers would end with a 26% stake in the combined corporation

The stock swap  needs 75% approvals for it to go through and that means according to the FT a 16.9% block in Xstrata is enough to postpone another long pending deal for another day. in favor of the deal is the fact that institutional shareholders are unlikely to block the deal.

Though competitor BHP BIlliton has reneged on bids for Rio Tinto and Potash of Sasketchwan worth $66 bln and $20 bln, it spent $20 bln on Chesapeake and Petrohawk assets in shale/natural gas in the US in 2011. its own 2002 merger between “The big Aussie” BHP and the Anglo Dutch major Billiton created a company with two headquarters and a single management in 2002 listed in both Australia and London. It is  a leader in Iron ore, Copper, Aluminum, Chrome / ferro alloys and Nickel with combined sales of $71 bln in 2011 and profits of $23 bln. The combined company had a market cap of $42 bln a year after the merger in 2002 on $17 bln 2002 revenues

Its Dual listing is of separately issued shares and adds up to a $200 bln capitalisation currently

Glencore revenues were $145 bln for 2011, twice that of BHP Billiton and only $42 bln in Market Capitalisation. Xstrata likely ends 2011 with $32 bln in topline and $6 bln in “Attributable Profit” with $52 bln in Market Cap







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This entry was posted on February 6, 2012 by in Financial Markets and tagged , , , , , , , .


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