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EC approves Xstrata-Glencore tie up

Oilfield Technology,

The proposed mega-merger between miner Xstrata plc and commodity giant Glencore International plc has received clearance from the EU’s competition regulator, the European Commission (EC).

The takeover would create the world’s fourth largest mining company, combining Xstrata’s coal, nickel, copper and zinc businesses with Glencore’s cotton and crude oil interests.

Glencore received shareholder backing for its takeover of Xstrata and approval from the EC in late November, under the condition that it terminates an exclusive European zinc sales agreement with Belgian zinc producer Nyrstar and sells its 7.8% share in the company. This will reduce Glencore-Xstrata’s share of the European zinc market from over half to under 40%, i.e. below the threshold at which antitrust concerns are raised.

Eurofer: EC did not go far enough

However, this did not go far enough for the European Steel Association (Eurofer), which criticised the ruling. Gordon Moffat, director-general of Eurofer, said the combined company could “still exert controlling influence on the zinc markets, for instance by artificially shortening supplies.”

Glencore still needs to receive final approval from authorities in South Africa and clear antitrust regulation in China, but neither Government is expected to halt the deal. The combined company is hoping to increase its market share in China, where both companies currently sell minerals.

If the takeover is completed, the combined company will be the world’s largest miner of zinc; the biggest producer of ferrochrome (an alloy of chromium and iron used in the production of stainless steel); and the top exporter of thermal coal. It also has the potential to be the world’s biggest copper miner.

The merger is expected to be finalised at the beginning of 2013.

Written by Jonathan Rowland.

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