Glencore-Xstrata merger won’t happen this year

The Wall Street Journal (sub required) is reporting that industry regulators in the European Union are stepping up scrutiny of the mooted $90 billion merger of Swiss commodities trader Glencore and coal giant Xstrata.

This after steelmakers and other European players “raised fears that the deal could create too powerful a player” in the market for zinc, nickel and coal.

The whole vetting process could take until early 2013 the paper says. That is if the deal goes ahead at all.

Glencore is offering 2.8 shares for every one of Xstrata, but Xstrata shareholders have threatened to block the deal.

They accuse Ivan Glasenberg, chief of Glencore, and Xstrata CEO Mick Davis of negotiating “a cosy stitch-up” without consulting them about getting a better offer rather than a ‘merger of equals.’

Those holding out for a sweetener – something Glasenberg has repeatedly rejected – point to the fact that growth prospects for Xstrata is much healthier than Glencore.

Xstrata is the world’s biggest exporter of thermal coal and the fourth-largest copper producer and in the decade under Davis has gone from having a fewer than 2,500 employees to a workforce exceeding 70,000 in 20 countries.

A combined Xstrata and Glencore would have revenues in excess of $100 billion with as much as 80% of sales earned from mining.

Even before building up Xstrata through a series of billion dollar transactions, Davis was a formidable dealmaker who with fellow South African Brian Gilbertson created Billiton. Davis left for Xstrata after Billiton was sold to BHP in 2001.

Glasenberg and Davis both cut their teeth in their native South Africa’s coal industry in the 1980s.

Glasenberg is no slouch when it comes to buying up companies either. Earlier this week Glencore snapped up Canada’s grain handler and agricultural retailer Viterra for $6 billion.

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