Xstrata plans to finance the purchase of Glencore’s Australian and South African coal operations with fresh capital and debt. Swiss-listed Xstrata AG will create a new company, Xstrata plc, initially listing in London, and later in a secondary listing in Switzerland.
To help pay for the coal acquisition, the newly formed Xstrata Plc would aim to raise at least 650 million sterling ($US927.1 million) in a share offer. It would also use a $2 billion debt facility to raise cash, refinance Xstrata AG debt and provide working capital. The $2.5 billion price tag includes debt of $US317 million, which Xstrata will assume, and loans of $US197 million.
Currently Glencore owns a 38.5% stake in Xstrata and will have around 40% of the new company.
Last year Glencore was on the verge of floating the assets in Australia under the Enex banner but the plan was deferred after the September 11 attacks on the U.S. While share prices have dropped significantly since September, the $US2.5 billion Xstrata is paying compares to original estimates for the Enex float of $US1.6 to $US2.1 billion.
Xstrata chief Executive Mick Davis said Xstrata would use its new structure as a platform for acquisitions, with zinc a priority.
"Our ambition is to grow the company into a position where we have very significant critical mass and we can tackle any mining or metals project that comes our way, but most importantly to create a lot of value for shareholders," Davis told Reuters.
"This transaction puts us on the playing field, whereas before, Xstrata was not on the playing field."
Davis also said that the transaction is earnings accretive from day one and will earn returns in excess of its cost of capital at long-term Australian export thermal coal prices as low as $US26/t.
The new entity has 2001 pro-forma revenue of $US1.65 billion and a net profit of $US250 million, compared with Xstrata AG's 2001 top line of $US613.6 million and bottom line of $US11.3 million.
