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Dangerous Xstrata-Glencore merger close to reality

13 September, 2012Six months after the mining giant Xstrata and the commodities trading giant Glencore first announced their merger, the US$36 billion deal now seems close. A new and final offer has an approval deadline of 24 September.

Glencore’s new takeover offer, announced 10 September, has been raised 12 per cent from 2.8 to 3.05 Glencore shares to each Xstrata share. The other trade-off between the two groups is over top management positions, now the Glencore CEO Ivan Glasenberg, who owns an US$8 billion stake in Glencore, will become CEO of the proposed merged company after six months.

The merger deal has been seriously threatened over the past weeks by an unlikely ally in opposition, the Qatari sovereign wealth fund, ready to oppose the merger before conditions were renegotiated after overnight talks last Thursday between Glasenberg and Qatari prime minister Sheikh Hamad Bin Jasim Bin Al-Thani, also chairman of the fund. Xstrata is now expected to recommend the new deal to shareholders.

Both conglomerates have enjoyed a boom in demand over the last 10 years and have directed much of their enormous profits to themselves and their shareholders, paying little tax and operating under secrecy and lack of transparency.

IndustriALL Global Union remains opposed to the merger. Both Glencore and Xstrata have a long list of abuses against workers, communities and the environment.

The merged company would become the largest producer of coal and zinc, and the largest independent producer of copper in the world within four years. The multinational would be so large it would have the power to influence the price of basic metals.