[Xstrata and Glencore] Last of the big mining deals – by Peter Koven (National Post – February 8, 2012)

The National Post is Canada’s second largest national paper.

Mick Davis began his discussion of the biggest mining deal in history in an unusual way: by ripping his advisors.

“An advisor is somebody who gives you advice on what you would like to do, and simultaneously advises the market on what you may do through the press,” the blunt chief executive of Xstrata PLC said on a conference call Tuesday.

His feelings are understandable. Thanks to a constant flow of leaks in the European press, the friendly takeover of Xstrata by Glencore International PLC, its key shareholder and the world’s biggest commodity trader, was considered a fait accompli long before it became official this week.

The US$41-billion all-stock deal, announced Tuesday, creates a new dominant player in the mining industry. It will have a market value of about US$90-billion (the fourth biggest overall), and combining Xstrata’s mining operations with Glencore’s extensive knowledge of commodity logistics and trading creates a company with unique expertise across the whole commodity value chain.

The so-called “merger of equals” requires approval of Xstrata shareholders, and a couple of big ones have already stated that they want a bigger premium. But on Tuesday, many onlookers were already looking to the future and eyeing further consolidation.

Mr. Davis is a famously aggressive CEO — he completed a $20-billion takeover of Canada’s Falconbridge Ltd. in 2006, and tried to pull off much bigger mergers with Vale SA and Anglo American PLC. He will be in a better position to chase acquisitions once he takes over as CEO of the combined Glencore Xstrata, and on Tuesday he fanned those flames by promising to play a “decisive role in industry consolidation.”

However, experts are not convinced there are more megadeals coming, by this company or any other one. The industry has already undergone a giant wave of M&A in the past decade, and there simply are not a lot of big deals left to be done.

“Glencore and Xstrata were already linked and were already big companies that were fully capable of buying most of the potential takeover targets you might think about,” said Doug Bryce, a partner and M&A specialist at Osler Hoskin & Harcourt LLP.

For the rest of this column, please go to the National Post/Financial Post website: http://business.financialpost.com/2012/02/07/last-of-the-big-mining-deals/

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