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Glencore IPO seen as route to Xstrata

May 5, 2010

“The question hanging over the initial public offering of Glencore, the world’s biggest commodities trader, has moved from “if” to “how”.
Banks, seeing an IPO of at least $35bn (pound(s)23bn), have been pitching furiously to Glencore, which is understood to be considering many options. But there are difficulties in valuing this privately-owned powerhouse, which is a miner as well as a trader of everything from coal to soyabeans.
Observers suggest preparation for a flotation is the necessary precursor to a merger with Xstrata, in which Glencore has a 34 per cent stake, which could create a natural resources giant valued at more than $50bn. Speculation over a merger is something neither side has sought to damp.”

Source: Financial Times, May 3 2010


  • Glencore is reaching the limits of growth opportunities as a private company, as the possibilities to attract additional capital are limited without going public.
  • Glencore’s executives own a major stake of the company. Combined with the 30%+ stake of Xstrata Glencore holds, the executives will come close to owning a majority of the shares in the new company.
  • As it is more or less impossible to carry out an accurate valuation of Glencore, experts expect the company to go public and get a market valuation before merging with Xstrata.


  • Xstrata will be willing to cooperate, as the company might otherwise sooner or later become the victim of a hostile takeover by either BHP Billiton, Rio Tinto, Vale or Anglo American.
  • The companies will need to invent a reward system for Glencore’s executives that will not leverage the balance sheet too much when the executives retire and take their share of the equity.
  • The merger of the Mining & Metals firm and the Trading firm will introduce a new type of company to the competitive landscape. The combination will be a major player in a very large part of the commodities value chain
  • Key synergies will likely be found in consolidation of the trading departments (mainly reducing costs in Xstrata’s current operations) and in increased supplier power leading to renegotiation of trade terms.
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