‘Glenstrata’ Deal Wins Competition Approval from Brussels

on Nov 23, 2012
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**Xstrata-Glencore Merger Gets EC Conditional Nod**

After winning the support of their shareholders on Tuesday, Anglo-Swiss commodity giant Glencore (LON:GLEN) and Switzerland-based miner Xstrata (LON:XTA) have passed another hurdle on the way to creating one of the world’ largest natural resources company. Today, the European Commission cleared under the EU Merger Regulation the proposed tie-up after the buyer Glencore improved its initial offer to allay competition concerns in regards to the European zinc market. The EC regulators feared that the merged entity would have the ability and incentive to raise zinc prices. To address these concerns Glencore agreed to cancel its off-take contract with Belgium-based miner Nyrstar (EBR:NYR), the world’s largest zinc producer, and give up its 7.8 per cent stake in the company. Through this move Glencore will cut its share of the European zinc market from 50 per cent to about 40 per cent, which if maintained according to the commitments, would not allay competition concerns, the EC said.

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Since an agreement with Nyrstar is still required to be concluded by Glencore, today’s EC approval for the merger is conditional. Commenting on the antitrust authorities’ decision, the European competition commissioner Joaquín Almunia stated: “The proposed remedy ensures that competition in the European zinc metal market is preserved, so that European customers such as steel galvanisers and car makers can continue to produce valuable consumer goods at low prices and good quality”.

!m[Glencore Given Green Light but With Condition to Cancel Nyrstar Off-Take and Sell 7.8% Stake](/uploads/story/888/thumbs/pic1_inline.png)Following the EC conditional clearance of ‘Glenstrata’, as the merger has become popularly dubbed, shares in Glencore rose 3 per cent in London trading, while Xstrata’s stock increased 3.1 per cent. Nyrstar’s shares, on the other hand, dropped as much as 1.8 per cent after Brussels announced its condition Glencore to end the zinc-purchase pact and sell its stake in the Belgium-based company.

**Chinese, South African Regulatory Approvals Next on Glencore’s Checklist**
After addressing Brussels’ competition concerns and winning the EC approval for the merger, Glencore has only two hurdles remaining on its way of creating one of the world’s largest mining and trading powerhouses. The combined company must now clear antitrust hurdles in China, and secure a final approval from the South African authorities. ‘Glenstrata’ has already extended the deadline for these issues to be completed to December 31 this year, but people close to the companies believe that the processes could extend into the first month or so of 2013, The Financial Times reported earlier today.

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