Glencore, the world’s biggest commodities trader, is in talks to buy Swiss mining giant Xstrata in a move that could create a mining group worth $80bn.
Glencore already holds a 34% stake in Xstrata but has signalled its intent to buy the rest of the company, a move that would rival Rio Tinto‘s purchase of Alcan in 2007.
Separately Glencore and Xstrata are smaller than major competitors BHP Billiton, Rio Tinto or Anglo American but with the proposed merger the two companies would be significantly bigger leading some experts to speculate that the deal could lead to a flurry of new mergers across the industry.
BDO LLP corporate finance partner Chris Searle said "I guess this is no real surprise given that Glencore already owns 34% of Xstrata and Glencore’s IPO last year has now given a public valuation for its shares that can be used in an all share merge."
"Whether this merger triggers another round of consolidation in the industry remains to be seen, given anti-trust concerns around the world, but other companies may feel forced to merge just to keep up with this new giant," Searle said.
A done deal would rank Glencore as the world’s largest exporter of both thermal copper and zinc but tellingly wouldn’t add to the company’s Iron Ore portfolio – an area which the company has singled out in the past as a major target for growth.
The move could also provide a platform for another attempt to buy out Anglo American after a bid to buy out the Iron Ore giant failed in 2009.
Stock exchange regulations require Glencore to announce a firm intention to make an offer by March 1.