Glencore, Xstrata merger possible, combining mining and trading operations
Mining takeovers are accelerating as companies struggle to replace aging deposits and China's industrial growth stokes demand for construction, cars and appliances.
Thu, Feb 02, 2012 at 07:16 AM
MERGER: Swiss-based mining companies Xstrata and Glencore unveiled a blockbuster merger on Thursday that would create a commodities giant worth an estimated $80 billion. (Photo: AFP)
European stocks steadied Thursday as investors digested the prospect of a Glencore-Xstrata merger, a flood of company results and ongoing Greek debt talks, and on the eve of crucial U.S. jobless data.
Approaching midday, the benchmark FTSE 100 index eased 0.19 percent to 5,779.56 points and Frankfurt's DAX 30 dropped just 0.18 percent to 6,228.46 points, while in Paris the CAC 40 climbed 0.07 percent to 3,369.72.
The euro retreated to $1.3135 compared with $1.3161 late in New York on Wednesday, as banks remained locked in negotiations with crisis-hit Greece over a potential debt write-off deal in Athens.
Asian equities meanwhile rose on Thursday as upbeat manufacturing data from across the globe lifted spirits, while traders were also confident Greece would soon reach agreement with creditors.
Swiss-based mining companies Xstrata and Glencore unveiled a blockbuster merger on Thursday that would create a commodities giant worth an estimated $80 billion (61 billion euros).
"Xstrata plc confirms that it has received an approach from and is in discussions with Glencore International plc regarding an all share merger of equals which may or may not lead to an offer being made by Glencore for Xstrata," the former said in a statement to the London Stock Exchange.
The revelation sent their share prices soaring, with Xstrata surging 10.36 percent to 1,235.5 pence, topping the FTSE 100 leaderboard, while Glencore jumped 5.39 percent to 455 pence.
"The news from this morning on the potential tie up for Glencore/Xstrata — or Glenstrata — has been a move many have expected over the last few months," said Atif Latif, director of trading at Guardian Stockbrokers in London.
"Should the all-share merger of equals happen, it results in a game-changer for general commodity companies."
He added: "This deal, if confirmed, will bring huge value to shareholders and is a sound fit for both companies and bring them both into line to compete with larger mining companies."
However, the merger news was not enough to push all markets back into positive territory, as investors fretted over a raft of corporate earnings and ongoing worries over debt-laden Greece.
Energy giant Royal Dutch Shell said Thursday that its 2011 net profit jumped by 54 percent to $30.92 billion (23.5 billion euros) on the back of higher energy prices.
But the Anglo-Dutch group also revealed that net profits slipped four percent to $6.5 billion in the fourth quarter, due to lower industry refining margins and North American natural gas prices.
In response, Shell's 'B' share price slid 2.35 percent to 2,271.3 pence as investors baulked at the quarterly earnings.
Anglo-Swedish drugs giant AstraZeneca meanwhile said it would axe 7,300 jobs by the end of 2014 in a new cost-cutting drive, despite bumper annual profits.
It also warned that earnings were expected to fall this year as patents on key drugs expire, sparking increased competition from generic drugmakers, and amid government intervention in Europe and the United States.
The news pushed AstraZeneca's share price 4.29 percent lower to stand at 2,957 pence.
Elsewhere, Anglo-Dutch food and cosmetics giant Unilever reported essentially unchanged profit figures for 2011, amid difficult markets and pressure from rising commodity prices.
In reaction, Unilever shares slid 3.88 percent to 2,004 pence in London trading.
Across in Frankfurt, Deutsche Bank, Germany's biggest lender, reported a bigger-than-expected drop in earnings at the end of last year as the eurozone sovereign debt crisis hurt business.
Deutsche Bank said in a statement it booked a pre-tax loss of 351 million euros in the fourth quarter.
The numbers disappointed investors and Deutsche Bank shares dived 1.59 percent to 33.5 euros.
Meanwhile, Munich Re, the world's biggest reinsurer, said Thursday that profits plummeted last year due to heavy losses from both the eurozone debt crisis and a string of natural catastrophes.
The company said in a statement it booked bottom-line net profit of 710 million euros ($935 million) in 2011, a drop of 71 percent from a year earlier.
But, taking the fourth quarter alone, Munich Re's net profit rose by 33.1 percent to 630 million euros, beating analysts' expectations.
Munich Re shares were showing gains of around 0.64 percent, outperforming the general market.
Copyright 2012 AFP Global Edition