Glencore set to offer a merger compromise for EU regulators

City A.M. Reporter
COMMODITIES trader Glencore, hoping to speed its multi-billion pound takeover of Xstrata over its final hurdles, was last night gearing up to offer to sell part of the group’s zinc assets, meeting a deadline set by European authorities.

Industry sources said Glencore’s desire to avoid an in-depth investigation in Brussels would prompt it to respond to the call for disposals in zinc metal, where market concentration is most significant.

The sources said Glencore, which yesterday night had yet to submit its proposals, would weigh up the benefits of completing the deal quickly against the desire to retain large European plants like Xstrata’s San Juan de Nieva refinery, the largest zinc production unit in the world.

“It’s not a huge part of the business and [zinc metal] is the only area that will see an increase in concentration such that it requires a remedy,” analyst Nik Stanojevic at Brewin Dolphin said. “I don’t think it is a deal-breaker.”

Glencore and Xstrata shares are currently trading at levels that imply a ratio of 2.85 – a marginal improvement on the ratio at Monday night’s close and narrowing in on the deal ratio of 3.05, implying the market expects an agreement to be reached.