Glencore International Plc (GLEN), the world’s largest listed commodities supplier, may take six months to a year securing antitrust approvals around the world if it makes a bid to merge with Xstrata Plc (XTA), according to Norton Rose LLP lawyer Marc Waha.
The deal may need approvals from countries where it has assets or customers including Japan, South Korea, Canada, Australia and Brazil, as well as the U.S., the European Union, and China, Waha, an antitrust specialist and partner with Norton Rose in Hong Kong, said by phone today. The process may generate $15 million in legal fees, he said.
Glencore made an approach about an all-share offer for “a merger of equals,” Xstrata said in a statement to the London stock exchange yesterday. Glencore holds 34 percent of Xstrata and the rest of the company is valued at 21.9 billion pounds ($35 billion) based on the Feb. 1 closing price. Glencore, based in Baar, Switzerland, said in a statement there’s no certainty of an offer.
Officials from resource-importing nations including Japan and China are likely to seek supply and price commitments in return for an approval, Waha said.
“My hunch is that it will go through as long as the parties are ready to pay the commercial price,” he said.
The merger of Russia’s OAO Uralkali (URKA) and OAO Silvinit last year to create a single producer of potash in the country led to the companies offering to make commitments on volumes and prices to China before getting approval, Waha said. Seagate Technologies LLC also had to make concessions on local investment and corporate policy when buying Samsung Electronics Co.’s hard-disc drive business, he said.
In the process of trying to win approval, Glencore and Xstrata may weaken their bargaining position with Asian buyers of commodities, Waha said.
“You are saying I will keep Asia’s share in the total supply or maintain the same conditions, you are opening up yourself to a lot of reviews and perhaps lawsuits,” Waha said. “You are putting yourself in a weaker position when you negotiate with your customers and that’s exactly what the authorities want to achieve.”
London-based Linklaters LLP are advising Glencore and London-based Freshfields Bruckhaus Deringer LLP are representing Xstrata. Norton Rose is not advising either.
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