Glencore offers to end Nyrstar deal to land Xstrata – by Foo Yun Chee (Mineweb.com – November 1, 2012)

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A source close to the deal says Glencore is prepared to end an exclusive zinc sales deal and sell its minority stake in Nyrstar to win EU approval for its $33 billion takeover of Xstrata.

BRUSSELS (REUTERS) – Commodities trader Glencore has offered to end an exclusive zinc sales deal and sell its minority stake in world No. 1 producer Nyrstar to win EU approval for its $33 billion takeover of Xstrata, a source said on Wednesday.

The European Commission – which is examining the merger, one of the largest in the sector to date – is concerned the deal will hand the group an excessive slice of the northern European zinc market, the person familiar with the matter said.

Analysts estimate a combined Glencore-Xstrata, which would be the world’s largest zinc miner, would have 50 percent of the European zinc metal market. Ending Glencore’s agreement with Nyrstar would free up 350,000 tonnes, the person said.

The person said Glencore, the single largest shareholder in Nyrstar, was also willing to sell its stake of just under 8 percent in the company. The EU competition authorities will decide whether the offer is sufficient to allay regulatory worries or more is required.

The deadline for a verdict is set at Nov. 22, two days after Xstrata shareholders are called to vote on the bid.

One financial source familiar with the deal said Glencore could be asked for more concessions in order to satisfy regulators, with Nyrstar simply the first step.

If so, it would have to weigh the benefits of securing a regulatory green light quickly against seeking to avoid the sale of larger, profitable zinc assets and risking of a lengthier competition investigation that could last up to six months.

A likely additional disposal, if any, would be Xstrata’s Nordenham plant in Germany.

Other assets singled out by analysts include Glencore’s Portovesme lead and zinc smelter in Sardinia, and Xstrata’s San Juan de Nieva refinery, the largest zinc production plant in the world, but these are not expected to be put on the table as regulators are mainly concerned about the northern European market.

Glencore extended its offtake deal with the Belgian company last year until 2018.

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