Bloomberg News

Glencore Said to Win EU Approval for Xstrata Purchase

November 21, 2012

Glencore International Plc (GLEN) is set to win the European Union’s approval for its $32 billion takeover of Xstrata Plc (XTA) after offering to end a zinc-purchase agreement with Nyrstar NV, according to people familiar with the matter.

Glencore’s offer to scrap an accord to sell Nyrstar’s zinc output has satisfied EU antitrust regulators and removed the need to sell assets, two people said, asking not to be named because the information isn’t public. Glencore also offered to sell its stake of about 7.8 percent in the zinc company, valued at about 55 million euros ($70 million), one of the people said.

The European Commission on Oct. 31 reported Glencore’s proposal to make unspecified concessions and extended until tomorrow a deadline to make a public ruling on the deal.

Glencore, which yesterday got shareholder backing for its Xstrata offer, has an agreement to sell all of Balen, Belgium- based Nyrstar (NYR)’s so-called commodity-grade zinc. Nyrstar, the largest zinc smelter, produced about 1.1 million metric tons of the metal last year. A Nyrstar spokeswoman declined to comment.

“We understand that the companies proactively offered remedies that are likely to be in the ballpark of those required by the authorities,” Paul Gait, an analyst at Sanford C. Bernstein & Co. in London, said today in a report.

Chinese Approval

Officials from Baar, Switzerland-based Glencore and Xstrata declined to comment. The European Commission also declined to comment, beyond saying a decision to approve the deal or extend it would be taken by tomorrow’s deadline. The approval was reported earlier by the Financial Times.

Glencore and Xstrata shareholders approved the takeover in meetings yesterday, leaving approval by regulators in Europe and China as the last hurdles for the year’s biggest deal.

“The timeframe for response by the Chinese authority is uncertain,” Gait said.

After the combination, due to be completed by the end of the year, Glencore-Xstrata would have about 11 percent of global zinc output of some 13 million tons, and about 40 percent of the 1.9 million tons produced in Europe.

Zinc accounted for 18 percent of Glencore’s 2011 operating profit, and 10 percent at Zug, Switzerland-based Xstrata.

Glencore will gain through the takeover the right to sell all of Xstrata’s production of zinc, used to harden steel for construction and automobiles, compared with a third now.

Glencore, Xstrata, Nyrstar and Boliden AB (BOL) are the only four companies producing zinc metal in Europe. Boliden’s output of 460,000 tons would be the only European production not marketed by Glencore after the takeover without the Nyrstar concession.

To contact the reporters on this story: Firat Kayakiran in London at fkayakiran@bloomberg.net; Jesse Riseborough in London at jriseborough@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net


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