BAAR, SWITZERLAND — Glencore International P.L.C. and Xstrata P.L.C., two commodities companies focused on natural resources and each based in Switzerland, have announced an agreement to merge the businesses, creating a $90 billion company.
The agreement calls for a merger ratio of 2.8 new Glencore shares for each Xstrata share held, excluding Xstrata shares currently owned by Glencore. Xstrata shareholders other than Glencore will own 45% of the combined entity.
According to the companies, the combination will bring together two complementary businesses creating one with a “unique business model, fully integrated along the commodities value chain, from mining and processing, storage, freight and logistics, to marketing and sales.”
Mick Davis, chief executive officer of Xstrata, will be c.e.o. of the combined business. Ivan Glasenberg, who is c.e.o. of Glencore, will be deputy c.e.o. and president.
“The combined group will benefit from enhanced scale and market positions in the production and marketing of key commodities as well as an industry leading diversification profile by commodity and which and improves cash flow diversification,” the companies said.
The business will have major and expanded operation footprints in emerging regions for mining investments, including the African copper belt, Kazakhstan and South America, the companies said.
In the 12 months ended Dec. 31, 2011, Baar, Switzerland-based Glencore had EBITDA (before exceptional items) of $6.5 billion on revenues of $186.2 billion. Over the same period, Zug, Switzerland-based Xstrata had EBITDA (before exceptional items) of $11.7 billion on revenues of $33.9 billion.
“We have a fantastic opportunity to create a new powerhouse in the global commodities industry,” Mr. Glasenberg said. “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.”
Xstrata is a major international mining and metals company, focused on seven commodities (coal, copper, ferrochrome, nickel, zinc, platinum and vanadium) and operating in more than 20 countries with more than 70,000 people globally.
Glencore is a producer and marketer of commodities with worldwide activities in the production, sourcing, processing, refining, transporting, storage, financing and supply of metals and minerals, energy products and agricultural products. The company operates in 30 countries and employs 2,700 in marketing operations and another 54,800 in industrial operations.
In mid-day stock market trading following the announcement, shares of Glencore were down about 3.5% and shares of Xstrata were off about 5%.