Xstrata and Glencore could take out Anglo

By far and away the biggest news yesterday (outside of the Facebook IPO, that was huge) was the imminent announcement that Xstrata and Glencore would merge. So? Who cares you ask? Well, listen in here for a bit, just concentrate. First, Glencore owns 34 percent of Xstrata. Both of these companies are listed in London. Both stock prices went up, because this would be seen as a positive merger for both sets of shareholders. But many tongues started wagging that the combined entity, of around 80 billion Dollars or so, could set in motion another wave of resource company consolidation. And of course Anglo American was once a target in the <...snigger...> merger of equals advance from Xstrata back in June 2009.

The combined entity (Glenrata or Xstracore) acquiring Anglo American seems to be closer to reality however. The combined entity would have more muscle to sway Anglo American shareholders into their argument of an even bigger entity. As a consequence of seemingly all this good news for all shareholders concerned, The London price of Glencore added 6.52 percent, Xstrata added 10.43 percent (same place) and Anglo American, also in London added 2.76 percent. So I guess now it does concern us, the worlds largest listed commodities trader and a well pieced together commodities miner. And, by no coincidence there is a stronger connection to us than you might think. Mick (Michael) Davis, who runs Xstrata (and who would run the combined entity) is South African by birth. He went to Rhodes University in Grahamstown. He worked at Eskom for nearly 6 years.

But wait, the fellow who runs (apparently a few miles each and every day in his running shoes too) Glencore is a fellow by the name of Ivan Glasenberg. Who grew up in Illovo, just up the drag here, and went to WITS University, also round here, six or seven off ramps south on the M1. Glasenberg has been running Glencore for as long as Davis has been running Xstrata, around ten years. But Glasenberg has been at Glencore for years. And in the nearly 30 years there has built his stake up to just shy of 16 percent of the business. And as such, is the richest South African. Technically speaking of course. I am guessing that Switzerland, Hong Kong and Beijing have been mostly home in that time.

These guys are smart. Real smart. Some of our finest exports. And really well regarded. Glasenberg is no longer out of public sight, his business, Glencore is no longer a secretive entity. Perhaps it is time to take it up more than just a few notches. I would not want to put the proverbial horse before the cart, the regulatory authorities across the globe would give this deal a long and hard look. So, no talk of Anglo being a target until this deal is finalised. Both the WSJ and the FT reports that I read suggest that according to UK law, Glencore has until the first of March to announce a formal bid. Bloomberg broke the story, that is what I can understand. They are all my favourites.

In the mean time you might as well familiarize yourself with Xstrata operations. Nice. Big news. Ironic that Mr. Market thinks that two "Swiss" businesses run by South Africans could be looking at acquiring a South African (history anyhow) business run by a North American. Anglo. Swiss. North American. In London. Mick, Ivan and Cynthia. Sounds like too much Cluedo. Paul added some colour to this story (and others) last even in his Mad Markets piece, watch it on YouTube -> 2 February - Mad Markets with Paul Theron. This is the daily slot which you can catch on channel 410 on CNBC in closing bell.