Glencore to buy rest of Xstrata, creating $90b mining behemoth

London: Commodities trader Glencore yesterday agreed to buy the remaining 66 per cent of miner Xstrata for $41 billion (Dh150.5 billion) in a record deal to create a powerhouse spanning mining, agriculture and trading.

In what has been billed as a merger of equals, Glencore, the world's largest diversified commodities trading house, and Xstrata will form a company worth $90 billion to rival other mining heavyweights such as BHP Billiton and Rio Tinto.

The new group, which will have mining assets from New Caledonia to the Democratic Republic of Congo, is expected to use its combined clout to look at other deals, including potentially a takeover of Anglo American, analysts say.

"M&A [mergers and acquisitions] is a space that you'd expect the combined group to be in," Xstrata chief executive Mick Davis, who will be CEO of the enlarged Glencore, said.

"We have a combined entity which has much greater flexibility to be opportunistic and capture the right opportunities when they are there."

Glencore will issue 2.8 new shares for each Xstrata share. The ratio is a 15.2 per cent premium to Xstrata shareholders compared with its share price last Wednesday before word leaked out about the merger talks, a joint statement said.

Shareholder resistance

Standard Life Investments, the fourth largest investor in Xstrata, said it intended to vote against the deal because it "clearly undervalues" the company's assets and future earnings potential.

"Consequently it is our intention to vote against the deal unless the merger terms for Xstrata shareholders are materially improved," David Cumming, head of Equities, Standard Life Investments said.

Standard Life holds 63.6 million shares in Xstrata.

• 2.8: new Glencore shares for each Xstrata share
• 15.2%: share premium for Xstrata shareholders