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Glencore eyes Xstrata takeover

Xstrata “’ possible
merger with Glencore
London, England — MININGREVIEW.COM — 03 May 2010 – European trader Glencore International “’ one of the world’s largest suppliers of a wide range of commodities and raw materials “’ is studying a merger with Xstrata to create a mining and trading group worth US$84.5 billion (R633 billion).

“Glencore is working on a potential merger with Xstrata, and both sides have hired banks as advisers,” a source close to the deal told Reuters, adding that a deal was not imminent and would probably be months away.

The Sunday Times reported here that Glencore’s advisers were discussing the details of a two-stage proposal to the Xstrata board that would see Glencore “’ which owns 34.4% of Xstrata “’ list in London via a reverse takeover.

It added that Glencore would then have to sell down its stake in the enlarged group immediately through a share placing, ensuring that its stake in the enlarged company did not exceed 40% “’ something it said Xstrata had pushed for.

Speculation about a possible merger with Xstrata first surfaced in December when Glencore issued US$2.2 billion (R16.5 billion) in convertible bonds “’ one step towards a possible listing that could value it at more than US$35 billion (R262 billion).

“Glencore is in no rush whatsoever,” the source told Reuters.Commodity markets have recovered and Glencore’s liquidity is comfortable, said the source, who declined to be identified. “There is no urgency whatsoever.”

Xstrata, whose management would retain control of the combined company if a deal went through according to the Telegraph, was valued at 33.4 pounds sterling (R380 billion) as of Friday close.

Both companies were unavailable for comment when approached by Reuters.