Australia a key part of empire formed in $82 billion marriage of Xstrata and Glencore.
AUSTRALIA would be a crucial part of the resources empire to emerge from an $82 billion marriage of Swiss companies Xstrata and Glencore, and analysts say the new entity would be likely to expand here through mergers and acquisitions.
A formal offer from Glencore is likely within 26 days - and perhaps as early as next week - after the two companies confirmed that merger talks were under way.
If successful, the merged entity would rely on Australian mines for 33 per cent of its revenue, according to an analysis by Swiss bank UBS.
The merged company would also have 28 per cent of its assets housed in Australia, meaning that thousands of Australian jobs are potentially affected by the merger talks in Europe.
Most of those jobs are in Queensland and New South Wales, where Xstrata has 17 coalmines.
Staff at Xstrata coalmines in NSW were given information on the merger situation when they arrived at work yesterday.
While the merger is estimated to result in savings of close to $US1 billion ($933 million), there was no indication yesterday that Australian jobs were at risk.
Mid-tier Australian coal companies, however, could be vulnerable, with the new entity expected to be hot on the acquisition trail in the years ahead.
One analyst said Xstrata's Mick Davis was known to be keen on acquisitions, but had been constrained by his company's underperforming share price in recent times.
Xstrata's London-listed shares have fallen 20.2 per cent in the past year, while BHP and Rio Tinto's London-listed shares have fallen by 12.7 per cent and 9.9 per cent respectively in the same period.
The analyst said Mr Davis could become acquisitive again if he stayed on with the new entity. ''It would give him a bigger platform and he'd probably reinvigorate some of his M&A aspirations,'' he said.
But CLSA analyst James Stewart said the merger was unlikely to send the share prices of Australian coal stocks soaring, as a busy period of mergers and acquisitions in the sector meant most stocks already had a takeover premium built into their price.
One of the stocks at the centre of recent merger activity in the coal sector - Whitehaven Coal - revealed last night that heavy rains in north-eastern Australia would rob it of at least one week's worth of production.
Four of Whitehaven's open-cut mines have been temporarily closed because of heavy rain and water in the pits.
Whitehaven is expected to soon finalise a $5 billion merger with Nathan Tinkler's Aston Resources.
Whitehaven shares fell 15? to close at $5.48 yesterday.
Frequently Asked Questions about this Article…
What is the Xstrata–Glencore merger and how large is the deal?
The proposed merger is between Swiss companies Xstrata and Glencore and has been described as an $82 billion 'marriage' to form a major resources empire. The talks confirmed a merger was under way and analysts expect a formal offer from Glencore soon.
When is a formal offer from Glencore expected and what are the timing details?
According to the article, a formal offer from Glencore was likely within 26 days of the announcement and could arrive as early as the following week, once merger talks progressed.
How exposed would the merged Xstrata–Glencore group be to Australian mines and assets?
A UBS analysis cited in the article said the merged group would rely on Australian mines for about 33% of its revenue and would have roughly 28% of its assets housed in Australia, underlining Australia’s importance to the new entity.
Could the Xstrata–Glencore merger put Australian mining jobs at risk?
The article says thousands of Australian jobs could be affected because a significant portion of the merged group's assets and revenue come from Australia, with many jobs in Queensland and New South Wales. However, at the time of reporting there was no indication that Australian jobs were definitely at risk.
How might the merger affect mid‑tier Australian coal companies and takeover activity?
Analysts in the article suggested the new, larger entity would likely expand in Australia through mergers and acquisitions, making mid‑tier Australian coal companies potentially vulnerable to takeover approaches as the merged group pursues acquisitions.
Will the Xstrata–Glencore merger boost Australian coal share prices?
CLSA analyst James Stewart said the merger was unlikely to send Australian coal stocks soaring because the sector had already seen a busy period of mergers and acquisitions, meaning takeover premiums were largely priced into many stocks.
What cost savings is the merger expected to generate?
The article estimates the merger could result in cost savings close to US$1 billion (around $933 million), driven by efficiencies from combining the two companies.
What recent operational and merger news affected Whitehaven Coal mentioned in the article?
Whitehaven Coal reported heavy rains in north‑eastern Australia that forced temporary closure of four open‑cut mines and cost at least a week's worth of production. The company was also expected to soon finalise a reported $5 billion merger with Nathan Tinkler's Aston Resources, and its shares fell about 15% to close at $5.48.
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