Glencore International Plc and Xstrata Plc (XTA) will probably win antitrust approvals for their 22.1 billion-pound ($35 billion) merger plan provided they agree to offload some assets, Squire Sanders said.
The regulators’ “approach may be to seek to provide a negotiated approval,” Duncan Maclean, leader for energy and natural resources at the law firm, said in an interview in London. “Conditions may include specific or identified divestments of particular assets in order to comply with the competition requirements in those jurisdictions.”
Glencore, the largest publicly traded commodities supplier, said Feb. 24 it would formally notify the European Commission of its proposal, for assessment under regional merger regulations. U.S., South African and Chinese approvals will also be sought.
“If the transaction gets a tick from regulators in the European Union, that’s probably going to be something that’s acceptable in other economies,” Maclean said. “They may require specific assets in a specific jurisdiction to be divested but generally if it gets through one of the big economies’ regulators, then it is more likely to be OK with the rest.”
European steel lobby group Eurofer last month said it was concerned that the takeover would harm competition in the zinc, nickel and coal markets. The combined Glencore and Xstrata would be the world’s third-biggest producer of mined copper, the largest zinc miner, and the biggest exporter of thermal coal.
Chinese thermal-coal producers probably won't oppose the deal as the country’s supply of the fuel is diverse, the China Coal Transport and Distribution Association said on Feb. 3. Chinese steel mills opposed BHP Billiton Ltd. (BHP)’s failed takeover offer for Rio Tinto Group (RIO) in 2007, arguing the combined company would have had too much control of the world’s iron-ore market.
BHP-Rio “was a more problematic transaction,” Maclean said. “Xstrata and Glencore have got common DNA, they are not truly independent competitors in the same markets. One is primarily a trading house, the other is a diversified mining company. It’s probably of far less impact than two big mining houses coming together.”
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