Ivan Glasenberg breathes a sigh of relief as China gives the go ahead on his $64billion merger
After more than a year of intense negotiation, the CEO of global mining concern Glencore has leapt what looks like the final major barrier in his marathon to bring his company’s merger with Xstrata to a successful conclusion -making for one of the largest deals in the history of the natural resources industry.
/ By Albert Hecht /
With the date of April 15 figuring prominently for some time to receive approval from the powers that be in Beijing, Ivan Glasenberg eventually made a considerable compromise by agreeing to sell off his company’s interests in a major copper mining project in Peru under the exotic title of Las Bambas. As well as agreeing to sell off Las Bambas, after the Chinese government had expressed concern that Glencore would hold a monopoly on the copper market, the only other condition that they called for was a guaranteed continuation of supply to of copper ore, as well as being the equivalent price as to what Glencore and Xstrata have been supplying for the previous two years.
The fact that Chinese anti-trust regulators were involved in the deal and were considering exercising their power of veto something that really counts in the Chinese business world while there are some precedents where attempted takeovers have not ended favorably particularly Coca-Cola’s intended $2.4 billion takeover of juice maker Huiyuan.
Now that the merger almost signed and sealed, it has also been revealed that Xstrata’s chief executive Mick Davis will be leaving almost immediately with Ivan Glasenberg taking up the role of CEO of Glencore-Xstrata.
The announcement of the intended merger between Glencore and Xstrata broke originally in February 2012, when the two companies first revealed their intentions to merge, in what was feted at the time as being the largest merger of the year. However thanks to Ivan Glasenberg‘s tough negotiations the merger became more of a takeover to allay the fears of shareholders, particularly Qatar’s sovereign wealth fund.
Increasingly delicate negotiations led to a series of delays from the original deadline , that was set for October of last year, with the signing of the deal being delayed another five times, due to the need to receive from clearance from bodies in Europe, South Africa and eventually the Chinese.
With the news of China’s blessing being granted Glencore has announced that they have until September of next year to sell their holdings in the Las Bambas project.
In the event that a buyer cannot be found, the Chinese regulators will be given the option of selecting one of Glencore’s other copper mining operations either in the Philippines, Papua New Guinea, or in South America. To ensure that the deal will go through Glencore have given their permission to sell off the asset chosen at auction without a reserve being fixed.
Barring any other unforeseen circumstances, Glencore is now looking to finally sign the takeover agreement by early May.
On the news of the Beijing green light, shares in Glencore shares rose by 1.3 per cent on the London stock exchange while Xstrata did better, rising by 2 per cent.