Glencore, Xstrata Enlist 18 Senior Bankers to Seal $90 Billion Merger Deal
Xstrata Plc (XTA) and Glencore International Plc (GLEN) enlisted 18 senior bankers, from firms that advised both companies through a decade of deals, to seal their agreement to create a $90 billion mining and commodity-trading powerhouse.
Xstrata turned to bankers including JPMorgan Chase & Co.’s Ian Hannam and Deutsche Bank AG (DBK)’s Nigel Robinson, while Glencore worked with Citigroup Inc. (C) bankers including David Wormsley and Morgan Stanley’s Michel Antakly. Michael Klein, a former investment banking chairman at Citigroup, also helped broker negotiations, working as an independent adviser. Klein stepped down from Citigroup in 2008 after working for the New York-based bank since 1985.
The official list of advisers includes bankers from those firms as well as from Goldman Sachs Group Inc. (GS) and Nomura Holdings Inc. (8604), which advised Xstrata. The banks are set to reap as much as $140 million in fees from the transaction, according to data from New York-based research firm Freeman & Co.
The merger will create the world’s fourth-largest mining group and may prompt further takeover activity in the resources sector and beyond.
“This shows M&A activities are coming back strongly. The consolidations will probably continue, not only in the mining space,” said Matthias Fankhauser, a fund manager at Clariden Leu in Zurich, which oversees about $100 billion in assets. The merger “is definitely a good start of the year” for the advising firms, he said.
$10 Billion IPO
Glencore also called on Morgan Stanley (MS)’s Laurence Hopkins and Alastair Cochran. At Citigroup, Tom Reid and Simon Lindsay advised Glencore, according to the companies’ statement today. Goldman Sachs’s Brett Olsher and Luca Ferrari were advisers to Xstrata.
Nomura tapped its co-head of global investment banking, William Vereker, as well as William Barter and Shaun Treacy, head of U.K. investment banking and corporate broking and global co-head of natural resources and power, respectively.
Citigroup’s Wormsley, who helped advise Glencore on its $10 billion initial public offering last year, returned to the New York-based bank after a short sabbatical that followed its sale of record label EMI to Vivendi SA and Sony Corp. (6758)
Goldman Sachs’s Olsher joined the firm in 2010 from Deutsche Bank, which has a corporate-broking relationship with Xstrata and helped take Xstrata public in 2002. JPMorgan, the previously independent Cazenove, BNP Paribas SA and HSBC Holdings Plc also worked on Xstrata’s IPO.
At Deutsche Bank, Khaled Fathallah and Nick Bowers also worked with Xstrata.
Dining in Cape Town
At JPMorgan, which also serves as a broker to Xstrata, Hannam helped the mining company first sell shares in 2002, and was involved in many of its subsequent acquisitions, including its $18.1 billion purchase of the Canadian nickel producer Falconbridge Ltd. in 2006.
London-based Hannam, a former soldier, was in Cape Town yesterday attending the annual Investing in African Mining Indaba conference and dined there with Evy Hambro, the portfolio manager of BlackRock Inc. (BLK)’s $16 billion World Mining Fund, according to a person with knowledge of the meeting. BlackRock is among the top 10 shareholders of both companies, according to data compiled by Bloomberg.
Glencore’s IPO in May was crucial to laying the groundwork for the transaction, which was negotiated before Christmas, as it provided a starting point for agreeing a valuation, according to a person with knowledge of the transaction.
The deal cements Goldman’s spot as the world’s top M&A adviser and catapults Nomura to No. 6 from 15th, the data show. The deal boosts Deutsche Bank two notches to fourth and Morgan Stanley to fifth. Citigroup maintains its position as second.
The merger, which tops Rio Tinto Plc (RIO)’s $38 billion takeover of Canada’s Alcan Inc. in 2007 to become the largest mining deal ever, comes after a poor showing for takeovers at the end of last year. The value of mergers and acquisitions globally dropped to the lowest level in more than a year in the fourth quarter of 2011, with announced deals slumping 14 percent from the previous three months to $473 billion, Bloomberg data show.
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