According to analysts at MDK Global Advisors, mining firm Xstrata has publicly announced intentions to merge with Glencore, the world's leading trader of commodities.

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PRESS RELEASE
TAIPEI, TAIWAN | 07 FEBRUARY 2012
© MDK Global Advisors
MDK GLOBAL ADVISORS COMMENTS ON GLENCORE AND XSTRATA CONFIRM
MERGER DEAL WORTH $90BN
According to analysts at MDK Global Advisors, mining firm Xstrata has publicly announced intentions to merge with Glencore, the
world's leading trader of commodities. "The merger will value the united new company at $90bn (£56bn), of which Xstrata would
incorporate $39bn." Commented Su Tai, Research Director at MDK Global Advisors.
The announcement came as Xstrata revealed a 20 per cent rise in earnings for 2011, to USD 5.9 billion (GBP 3.8 billion). But two
significant shareholders of Xstrata say they will vote against the agreement as it undervalues their shares. Schroders and Standard
Life Investments, who own 3.6 per cent of Xstrata between them, said the agreement undervalued the company, and they would
vote against the merger.
"This is a fabulous opportunity for Glencore, it's certainly a superb deal for the Xstrata management, but it's a bad deal for Xstrata's
majority shareholders," Richard Buxton of Schroders, said. The two firms described the deal as a "merger of equals" with the new
entity to be named "Glencore Xstrata International PLC".
The new group will be the world's leading exporter of coal for power plants and the largest zinc producer. Ivan Glasenberg, CEO of
Glencore, said the deal would create "a new powerhouse in the global commodity industry." The new firm will be headed up by
Xstrata CEO Mick Davis, with Ivan Glasenberg becoming deputy chief executive. The head of Xstrata finance will likewise hold the
senior position in the joint venture.
"The deal will increase the diversification of both firms, with Glencore achieving more control over the high-quality mining resources
of its already 34% partner Xstrata, and the latter acquiring complete access to Glencore's trading and logistic platform,”
commented an Executive Research at MDK Global Advisors.
They added, "Xstrata valuation translates to a share price of 1,290p, compared with the 1,100p market price last week at which
shares were trading before the announcement of the deal emerged. Other than Glencore, Xstrata's shareholders will have a 45%
stake in the new company.”
Shareholders will be eligible to vote on the deal in April, following confirmation of Glencore's full-year results. Xstrata said the deal
would require a majority of 75 per cent. Excluding Glencore's 34 per cent stake, this would mean shareholders with at least 17 per
cent of Xstrata's shares could block the merger.
On Tuesday afternoon, news of the unease saw shares of Xstrata fall nearly 5 per cent. According to stockbrokers Charles Stanley,
Xstrata's financial results for 2011 went well above industry forecasts. "Given this success, Xstrata shareholders are entitled to
question if this is the best offer available, as Glencore's paper was disappointing," the brokerage said.
Some analysts, however, thought the merger between the two corporations offered a good deal. Librium Capital's Richard Knights
said: "We think this seems like a decent opportunity for Xstrata shareholders, they obtain access to some swift increasing assets
and a world-class trading platform."
Just in May of last year, Glencore floated on the stock market in a record equity offering in London. In the financial market, the
traditionally secretive Swiss firm buys and sells metals, crops and fuels and invests in mining companies. Still, unlike Xstrata,
Glencore does not typically extract the stuff from the ground. Xstrata, for its part, holds large iron, copper and nickel reserves
throughout Africa, South America and Central Asia. In 2011, roughly half of its sales came from its copper business, while coal
added most to its profit growth.