Global mining giant Xstrata has agreed to an all-share marriage with commodities trader Glencore to create a $US90 billion global entity in what will be the world's biggest merger in the resources sector.
Xstrata, which in Australia is focused on copper, coal and zinc, on Tuesday booked a 12 per cent jump in attributable profit for calendar 2011, thanks to production expansion and strong commodities prices, to a record $US5.78 billion ($A5.41 billion).
This compared to $US5.15 billion ($A4.82 billion) for the previous year.
"A merger between Glencore and Xstrata offers a unique opportunity to create a new business model in our industry to respond to a changing environment, said Xstrata chief executive Mick Davis, who will become the head of the enlarged Glencore.
Glencore chief Ivan Glasenberg will be deputy chief executive and Xstrata chairman John Bond will retain his post.
Xstrata shareholders other than Glencore, which already has a 34.08 percent stake in the mining group, will hold 45 percent of the new group.
The combination of the two complementary businesses with long-standing links was the logical next step for both companies as demand for commodities continued to surge along with population growth, Mr Davis told a teleconference.
The tie up would create the world's fourth largest globally diversified resources company, Mr Davis said.
He said benefits of the deal included greater liquidity, providing shareholders with certainty regarding the ownership structure of Xstrata.
Other benefits included a strong position for continuing access to equity markets and playing an ongoing role in global industrial consolidation.
Mr Davis said there would be synergies of $US500 million ($A467.88 million) per annum from the first full year after the deal.
The combined entity would have the financial and strategic flexibility to pursue opportunities within and external to the expanded business, he said.
The company would retain its London and Hong Kong listings.
The planned tie-up is expected to result in a compound annual production growth rate, in copper equivalent tonnes, of 11 per cent per annum from 2011 to 2015.
The deal was expected to be completed in the third quarter after regulatory hurdles were cleared.
John Robinson, executive chairman of BlackRock-managed mining mutual fund Global Mining Investments, said the melding of Glencore with Xstrata was a pretty good combination.
BlackRock is Xstrata's second largest shareholder with a 6.21 per cent interest.
Mr Robinson said a merged Xstrata/Glencore would be well diversified, with 12 per cent of the world thermal coal market.
Xstrata is already the world's largest thermal coal exporter.
"It's not like a BHP Rio merger where obviously, from an iron ore perspective, it would have had a major impact," Mr Robinson told AAP.
The combined group's second-biggest product would be zinc, followed by lead, he said.
Most of the benefits of the deal would relate to their mutual exposure to coal in Colombia.
"From a management structure point of view, there is a lot of opportunity there for synergy to be developed," Mr Robinson said.
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