Market Overview

Glencore and Xstrata Merger Would Create Commodities Giant

British commodities supplier Glencore (LON: GLEN) announced it would be buying mining conglomorate Xstrata (LON: XTA) for $62 billion (£39.1 million) in what is slated to be the largest takeover ever in the mining industry. If the deal is approved, the merger would create a new commodities firm worth $209 billion.

Glencore is offering 2.8 new shares for every current share of Xstrata, valuing the firm at 1,290.10 British pence. The stock is currently trading at 1,228 pence, nearly 5 percent less than Xstrata's offer.

The new company will be known as Glencore Xstrata international Plc and will be listed in London and Hong Kong with headquarters in Switzerland.

Glencore already has a 34 percent stake in Xstrata, and is offering a premium of over 15 percent on Xstrata's share price in a deal that would create a commodities firm worth $90 billion offering mining, processing, storage, transport, and sales services. If the offer is withdrawn, Xstrata will receive a break fee of £298 million, or $470 million.

Shares in Xstrata fell nearly 3 percent in early trading in London, while shares in Glencore are down almost half of a percent. Stocks in Europe are broadly down, as worries over Greek debt continue to rock the European equities markets.

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