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Glencore and Xstrata confirm $90bn merger

• Xstrata shareholders will get 2.8 new shares in Glencore
• Deal values Xstrata at almost £40bn
• Miner’s bosses to be chief executive and finance director
• New company to be called Glencore Xstrata International

Mining group Xstrata and commodities trader Glencore have confirmed plans for a bn (£57bn) merger that will create a dominant new force in the global resources industry.

The proposed share-based deal will offer Xstrata shareholders 2.8 new shares in Glencore. Despite being described as a “merger of equals”, the deal values Xstrata at £39.1bn, a premium of almost 28% to its average price for the three months prior to the bid approach. Glencore already holds a 34% stake in Xstrata.

The two groups confirmed that the enlarged business, to be called Glencore Xstrata International, will be led by Xstrata chief executive Mick Davis while Glencore’s Ivan Glasenberg, who has been a friend of Davis since their school days in South Africa, will serve as his “deputy CEO and president”.

Similarly, the finance director’s role is to go to Xstrata’s Trevor Reid, while Glencore’s finance director Steven Kalmin is to serve as deputy.

Despite apparently taking the lesser executive roles, the Glencore team will remain a powerful force on the share register. The top 12 executives currently control almost a third of the company.

There has already been some speculation about how relaxed Glasenberg will be about ceding control to Davis. Both are frequently described as “big egos”. In an uncharacteristically deferential statement, the Glencore boss said: “I look forward to supporting Mick and working as part of what I am confident will be the leading team in the resources sector.”

Overseeing what is likely to be a crowded and opinionated board will be Xstrata’s existing chairman Sir John Bond, one of the FTSE 100′s most experienced boardroom heads having served as chair of Vodafone and HSBC. Bond will be 71 in July.

Davis said the planned combination was “the logical next step for two complementary businesses” while Glasenberg said it created “a new powerhouse in the global commodities industry”.

Despite being listed in London, where it will be one of the 10 largest businesses quoted on the stock market, the enlarged company, in common with its predecessor groups, will have very little presence in the UK. It will continue under Glencore’s corporate structure, which involves being headquartered in Switzerland and incorporated in Jersey for tax reasons.

Davis said: “Sources of supply are diverging from traditional mining regions to more complex and disparate locations, with a range of new industry participants seeking access to markets. At the same time, demand growth has shifted from Europe, Japan and the US, to emerging Asian economies. The commodities value chain is becoming longer and more complex, creating opportunities for a company that can pre-emptively participate at every stage.” © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds