Commodities giant still hungry for buyouts

GLENCORE has hit the acquisition trail for the third time since going public in May. This time it is offering A$268m for the 27 per cent of shares it doesn’t already own in Minara, the Australian nickel miner.

By paying a 36 per cent premium on Minara’s pre-bid price, Glencore is making it clear that it still thinks there is money to be made from nickel, and commodities in general.

It is also obvious that Glencore hasn’t lost its appetite for dealmaking. This offer comes less than two months after it splashed out $475m on a majority holding in a Peruvian copper mine and $10m increasing its stake in PolyMet Mining.

Glencore has always been an acquisitive beast. Originally a trading firm, its industrial investments – including 35 per cent of Xstrata – now account for the majority of its $6bn annual profits.

Its early M&A strategy was notable for its daring. It would make investments in early-stage projects, often doing deals with countries that its rivals steered clear of. The risk was much higher; the cost of the deal much lower; but the scale of the opportunity always much greater.

Australia, home to Minara, isn’t exactly a war-torn African country; Glencore will have to steer clear of such controversial acquisitions now that it is a public company.

But this deal bears at least one of the Glencore hallmarks. A 36 per cent premium might look chunky – but only when you ignore the recent collapse in the price of commodities.

Glencore’s offer values Minara at just over A$1bn, but at the start of 2011 it was worth almost A$130m more. So a less risky deal than the ones Glencore used to do before going public – but no less opportunistic.

david.crow@cityam.com