Last of the Big Mining Deals

Douglas Bryce

Feb 7, 2012

By Peter Koven, Financial Post

…Thanks to a constant flow of leaks in the European press, the friendly takeover of Xstrata by Glencore International PLC, its key shareholder and the world’s biggest commodity trader, was considered a fait accompli long before it became official this week.

The US$41-billion all-stock deal, announced Tuesday, creates a new dominant player in the mining industry. It will have a market value of about US$90-billion (the fourth biggest overall), and combining Xstrata’s mining operations with Glencore’s extensive knowledge of commodity logistics and trading creates a company with unique expertise across the whole commodity value chain.

The so-called “merger of equals” requires approval of Xstrata shareholders, and a couple of big ones have already stated that they want a bigger premium. But on Tuesday, many onlookers were already looking to the future and eyeing further consolidation.

However, experts are not convinced there are more megadeals coming, by this company or any other one. The industry has already undergone a giant wave of M&A in the past decade, and there simply are not a lot of big deals left to be done.

“Glencore and Xstrata were already linked and were already big companies that were fully capable of buying most of the potential takeover targets you might think about,” said Doug Bryce, a partner and M&A specialist at Osler, Hoskin & Harcourt LLP.

“This brings a few more companies under their radar screen, but it’s not a big sea change.”