Glencore: One of World’s Largest Mining and Commodity Trading Companies

                              EAE | Business | School
                                                      June 30, 2017

Glencore: One of world’s largest mining and commodity trading companies.

Introduction
Ivan Glasenberg, former champion race walker, who is now the boss at Glencore, was at crossroads. His company has seen tremendous growth in all of its categories and it was dwarfing its competitors due to its burgeoning size. The dilemma facing the racer turned CEO how to sustain this growth. The options were limited due to the size and scale of Glencore. He scratched his head while talking to his closest friend who advised him to discuss a possibility of a merger with another big mining company Xstrata. Ivan hang up the phone and started pondering on the idea given to him by his closest friend and business ally.

History
Glencore is an Anglo–Swiss multinational commodity trading and mining company. Glencore was founded in 1974 by Marc Rich and Co AG. It initially was focused on the physical marketing of ferrous and non-ferrous metals, minerals and crude oil. Shortly after, it expanded into oil products.

In 1981, Glencore acquired an established a Dutch grain trading company, which was the basis for its agricultural products business; later that year it added coal to their energy products segment.[pic 1]

From 1987, they began to diversify from purely marketing and trading, through key acquisitions in mining, smelting, refining and processing. Glencore made its first equity investment in an industrial asset where it acquired 27% of the Mt. Holly aluminium smelter in the US. This was followed by its first controlling interest in an industrial asset in 1988: a 66.7% interest in a zinc/lead mine in Peru.

Glencore acquired a stake in Xstrata (then Sudelektra AG) in 1990. It was renamed Glencore International in 1994 following a management buyout.

Glencore listed on the London and Hong Kong Stock Exchanges in 2011 and on the Johannesburg Stock Exchange in 2013.

Current situation
Glencore, a mining and commodity trading company is looking to take a quantum leap in their pursuit of growth. For this the company is looking for alternatives for fulfilling its strategic goals. One idea that was put forward by Ivan Glasenberg was to merge with Xstrata. Glencore proposed an offer to merge with Xstrata Company. The initial offer which was recommended by Glencore’s board was that Xstrata’s investors would get 2.8 Glencore shares per Xstrata share. The offer was dubbed excessive by some pundits who felt that Glencore went all in for this merger.

"We've always had the belief these two companies should be together," Glencore Chief Executive Ivan Glasenberg told at a financial conference in Moscow.

The company itself went public last year in 2011. The capital from this IPO was enough to buy the shares of Xstrata, which were selling at a premium. Ivan Glasenberg knew that in mining business, scale of the operations was crucial. Therefore an integration with Xstrata could help the company to meet its strategic objectives.

The merger could create one of the world’s largest natural resources groups, extending through more than 90 commodities from copper to barley and from oil to vanadium.