Glencore Extends Deadline For Its Multi-billion Dollar Deal

Glencore International Plc (LON:GLEN) (HKG:0805) announced Tuesday that the deadline for completing the multi-billion dollar merger with Xstrata PLC (LON:XTA) has been extended again. The Commodities giant told that it requires more time to finalize the talks with Chinese antitrust authorities to secure its final regulatory approval.

Glencore Extends Deadline For Its Multi-billion Dollar Deal

The Switzerland based company has now given a deadline of May 2 after extending it in March by a month to April 16. The merger with the Xstrata was initially announced in February 2012. The merged entities will form the world’s fourth-largest diversified mining company with a market capitalization of more than $70 billion.

Glencore International Plc (LON:GLEN) (HKG:0805) said that it had a “constructive discussions with [Mofcom]…and that these discussions are now in their final stages.” Mofcom is considering whether or not the combined entity, which will account for 10 percent of the copper concentrate imported into the China, will be able to influence the local copper market. China is currently the world’s biggest copper consumer.

Glencore is based in Switzerland and supplies raw materials such as oil, copper, and wheat. They own plants, warehouses and mines, and said that that the merger is “conditional” on Chinese regulatory approval and other court matters. The company also revealed that the talks with the Chinese authorities have been fruitful.

The extension of the deadline is the latest addition to the long line of difficulties for the proposed deal that was announced a year back. The deal over time has received investor criticism over the initial purchasing price. Only after Glencore International Plc (LON:GLEN) (HKG:0805) raised its bid to 3.05 of its own shares for each Xstrata PLC (LON:XTA) share in September, did shareholders agreed for the deal. The merged entity will be led by the Glencore’s chief executive, Ivan Glasenberg.

Since then, the Commodities giant have been assuring the antitrust authorities, again and again, in Europe, South Africa and China that the deal is in the best interest of the consumers. The European Union asked the company to spin off some of its assets and curtain its operations on the Continent. Glencore received the backing of the South African antitrust regulators in January.

Previously, also, there have been delays from Chinese authorities to grant regulatory approval to Glencore at the time of the acquisition of Canada-based grain trader Viterra Inc. (TSE:VT). The company had to wait for several months for approval, and the deal, which was announced in March 2012, could only be completed in December.

A report from Liberum capital expects Glencore International Plc (LON:GLEN) (HKG:0805) to get the final MOFCOM approval. The report gives a ‘buy’ rating to the stock and says that the merged entity will continue with the cost cuts and capex reviews “where we feel there’s scope for material upgrades to our forecast earnings and cash flow.”

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Aman Jain
Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at