It brings a major global miner with a strong interest in coal together with an international commodities trading house, creating an entity with an $80 million market capitalisation.
It has taken nine tortuous months, but the shareholder approval has cleared the way for the merger to proceed. The only things standing in its way are regulatory and UK court approvals.
The rationale for the merger is compelling, even if it comes at an awkward time for the mining industry and the coal sector in particular.
Bringing together a major mining company and a leading global commodities trader will create a unique business model in the natural resource sector. It effectively becomes a vertically integrated resources house.
Some of the benefits the two touted of the merger are:
- to optimise capital expenditure, accelerate growth and increase returns by combining the growth pipelines of the two companies
- to seek value at every stage of the value chain from discovery through to customer
- an estimated $500 million a year of earnings before interest, tax, depreciation and amortisation synergies by the end of 2013.
A combined entity will certainly have more cash to chase merger and acquisition opportunities.
Xstrata chairman Sir John Bond said the logic of combining the two was compelling.
“The merger brings together two highly successful and entrepreneurial management teams to form a major integrated natural resources group,” he said.
“The combined group will be optimally positioned to succeed in a changing industry landscape, unlocking value along the entire value and distribution chain from operation to customer, while offering globally diverse customers a reliable, tailored and efficient supply of
Of course the combined group will have to do all of this without Xstrata chief executive officer Mick Davis who, along with Bond, decided to depart.