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Business, Finance, Occupation & Industry

China OKs Glencore-Xstrata Merger

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By 24/7 Wall St.

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Swiss-based commodities trading house and mining company Glencore International announced last night that it has received approval from China’s Ministry of Commerce for its merger with Xstrata. The Chinese government did, however, insist on a few changes.

Glencore must sell a Peruvian copper project being developed by Xstrata by September 2014. But a more central condition is that the combined company must “offer to supply” its current Chinese customers an average copper concentrate volume of 900,000 metric tons under long-term contracts annually for eight years, beginning on January 1 of this year. There is also an eight-year requirement for sales of zinc and lead concentrates under both long-term and spot contracts.

Glencore has been directed to hire an “independent monitoring trustee,” whose job it will be to see that the company lives up to these agreements.

The Chinese also set some price controls:

The price for a minimum of 200,000 dry metric tonnes of copper concentrate will be offered in accordance with the applicable annual benchmark price agreed between major miners and major smelters during annual supply negotiations and the price for the remaining 700,000 dry metric tonnes of copper concentrate will be offered with reference to the applicable annual benchmark price.

In other merger-related news, Xstrata CEO Mick Davis has declined the offer to assume the role of chief executive and executive director of the merged company. Essentially he would have been paid for six months and then shown the door. Davis has some pride. Glencore’s CEO, Ivan Glasenberg, will become the CEO of the merged company as soon as the merger is completed.

Glencore now expects the effective date of the merger to be May 2, and the issuance and trading of new Glencore shares will begin on the London Stock Exchange on May 3.

Glencore made its offer for Xstrata, of which it already owned about 40%, in February of 2012. It just seems longer ago than that.

Glencore’s statement is available here.

Filed under: 24/7 Wall St. Wire, Commodities & Metals, International Markets, Mergers & Acquisitions, Mergers and Buy Outs

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From: http://www.dailyfinance.com/2013/04/17/china-gives-ok-to-glencore-xstrata-merger/

Business, Finance, Occupation & Industry

3 Things to Love About BHP Billiton

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By G. A. Chester, The Motley Fool

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LONDON — There are things to love and loathe about most companies. Today, I’ll tell you three things to love about the world’s biggest miner, BHP Billiton . I’ll also be asking whether these positive factors make BHP Billiton a good investment today.

Size and spread
BHP Billiton is not only the world’s biggest mining company, but it’s also the most diversified. Over the past three years, in broad terms, group revenue breaks down more or less equally three ways: iron ore, other metals, and petroleum and coal. Geographically, China is the largest market, supplying close to 30% of group revenue, but the remaining 70% comes from far and wide.

No miner can insulate itself from commodity prices, and BHP is no exception. However, with its early , mid-, and late-stage cycle metals; its diversification into oil and gas; and its wide geographic markets, the group is more resilient than its peers.

Boardroom
There have been fireworks in the boardrooms of BHP‘s Footsie rivals of late: Cynthia Carroll, boss of Anglo American, departed under shareholder pressure with no successor in place; Tom Albanese left Rio Tinto with equal abruptness under the cloud of a $14 billion asset writedown; and Xstrata chief Mick Davis is ceding control to Ivan Glasenberg of merger partner Glencore.

In contrast, BHP‘s announcement of the retirement of Marius Kloppers and the naming of Andrew Mackenzie as his successor was made amid little fuss. Was there just a teensy bit of salt-rubbing into rivals’ wounds as BHP referred to a “planned and considered” succession process that “has served the company well for over a decade”?

Kloppers’ tenure at BHP wasn’t faultless, but having taken up the job in October 2007, he did relatively well through a tough period. The company’s shares increased 18% on his watch, compared with hefty falls for Rio Tinto (23%), Anglo American (44%), and Xstrata (66%).

Dividends
BHP‘s new chief executive had been appointed by Kloppers in 2008 to lead the group’s nonferrous-metals business — the division from which Kloppers himself had graduated. While Mackenzie brings continuity, he has also promised productivity, capital discipline, and more emphasis on returning cash to shareholders. That’s good news for investors, because BHP‘s dividend record is already decent compared with those of its peers.

Since 2008 the dividend has grown from $0.70 to $1.12. As things stand, at a share price of 2,054 pence, BHP offers a 12-month forward yield of 3.8% — the highest income of all the Footsie’s big miners and above the average of the wider market, too.

A good investment?
I’ve just mentioned how attractive BHP‘s yield is, particularly given the new CEO‘s words on returning cash to shareholders. The price-to-earnings ratio and earnings growth also appear attractive once you look past the company’s current year-end of June 30. The P/E for the year ending June 2014 is forecast to be about 10, with analysts having penciled in earnings growth of some 30%.

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Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Should I Buy Glencore International?

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By Harvey Jones, The Motley Fool

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LONDON — These are heady days for mining and trading giant Glencore International , as it moves closer to completing its 22 billion-pound merger with fellow FTSE 100-listed miner Xstrata PLC. Both companies have just published their results, presumably as separate entities for the last time. Elsewhere, I’m asking the question “Should I Buy Xstrata?” Right now, I’m wondering if I should buy Glencore International?

Oil up, metals down
Glencore’s full-year results for 2012 was a mixed bag, but the market wasn’t complaining, driving the shares 5% higher. Group revenue rose 15% to 214 billion pounds, but underlying earnings fell 8%, largely due to falling commodity prices. The mining division’s 27% drop in adjusted earnings was offset by Glencore’s marketing operation, which posted an 11% increase, underlining the benefits of diversification. In total, adjusted earnings before interest and tax fell 17% to $4.5 billion. Unadjusted earnings per share fell 81%, while group net debt rose by 19% to $15.4 billion. Profits plunged 75% to $1 billion, largely due to that commodity price tumble and impairment charges, with Glencore taking a $1.2 billion hit on its reclassified stake in Russian aluminum producer Rusal. Net income fell to just over $3 billion, roughly as expected.

Xstrata marks the spot
Despite that profit plunge, Glencore announced a 5% increase in its dividend, which is good news for chief executive Ivan Glasenberg, who enjoyed a handy little dividend of 113 million pounds for this year. He hailed 2012 as “a year of significant achievement,” with healthy growth in its industrial and marketing operations, while its acquisition of Viterra has given Glencore a “truly global” agricultural business. At the top of the list, naturally, was its proposed merger with Xstrata.

Thinking big
Glasenberg is confident he will soon get the green light from China to seal the 22 billion-pound merger with Xstrata, which should bring even greater diversification, cost savings, and synergies. He was tightlipped about his plans for the new group, which will be larger than both BHP Billiton and Rio Tinto, although given the recent successes of Glencore’s marketing operations, we can expect that to be a key priority. He is banking on the new operation’s strength to ride out any market weakness, and maybe make acquisitions at favorable prices. Big could be beautiful.

Glencore holding
Glencore yields 2.7%, covered 4.8 times, with a progressive dividend policy. Trading on a price-to-earnings ratio of around 11 times earnings, it isn’t too pricey. Like all the major miners, Glencore is exposed to a further economic downturn, a Chinese hard landing, rising labor costs, and falling commodity prices. The merger brings added risk, as mergers do, but also plenty of opportunity. As recent results have shown, there is strength in diversity — and Glencore has a lot more diversity to come.

If you think Glencore is getting too big for its boots, you might find this a better growth bet. Motley Fool share analysts have found what they believe is <a target=_blank …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Mega-Miner Merger Delayed as Profits Slump at Glencore International and Xstrata

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By Maynard Paton, The Motley Fool

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LONDON — Shares of Glencore International  gained 5 pence to 375 pence and the shares of Xstrata  gained 20 pence to 1,120 pence during early London trading this morning despite both companies reporting reduced profits for 2012.

The FTSE 100 members, which agreed to merge last year, both suffered from declining commodity prices. Glencore recorded adjusted operating profits down 17% to $4.5 billion while Xstrata revealed adjusted operating profits down 43% to $4.8 billion. However, both firms managed to lift their dividends. Glencore raised its payout by 5% to $0.16 per share while Xstrata hoisted its payout by 14% to $0.40 per share.

Glencore also confirmed the completion of its merger with Xstrata would be delayed by another month. The merger had been expected to complete by the end of 2012, but protracted regulatory processes in South Africa and China have since pushed back the date to April 16. The merger was unveiled in February last year.

Ivan Glasenberg, Glencore’s chief executive, said:

2012 was a year of significant achievement for Glencore. Despite the challenging environment faced by the mining industry, Glencore delivered organic growth in its industrial businesses which complemented a robust performance in its marketing operations.

Mick Davies, chief executive of Xstrata, said:

Our businesses faced difficult operating conditions during the year, as the combined impact of falling commodity prices, ongoing inflationary pressure on operating costs and continued strong producer currencies relative to the U.S. dollar put pressure on our margins.

Based on today’s figures, both Glencore and Xstrata currently trade at about 13 or 14 times profits.

Of course, whether those P/E ratings, this morning’s results, the protracted merger process, and the general outlook for the mining sector all combine to make either Glencore or Xstrata a “buy” remains up to you. However, if you already own Glencore or Xstrata shares and are looking to diversify, this free special report covers a tip-top growth opportunity with operations far removed from the mining sector.

Indeed, the blue chip in question has lifted its earnings per share by 44% since 2009, owns subsidiaries that might carry considerable hidden value, and has just been declared “The Motley Fool’s Top Growth Stock for 2013.”

Just click here to download the report — it’s free.

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The article Mega-Miner Merger Delayed as Profits Slump at Glencore International and Xstrata originally appeared on Fool.com.


Maynard Paton has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Source: FULL ARTICLE at DailyFinance