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London - The regulatory clock started ticking on commodities
trader Glencore's takeover of mining group Xstrata after the pair said they
will notify the European Commission of the proposed $90bn deal.
Once the notification is acknowledged, the commission will
have 25 days to decide whether to approve, reject or begin an in-depth probe
into the plan to create the world's fourth-largest natural resource company by
market capitalisation in just one of a series of antitrust hurdles the two
companies will have to clear.
EU competition authorities have in the past considered the
two sides as a single entity as Glencore already owns over 34% of Xstrata -
enough to exercise control from a competition perspective, and therefore enough
to avoid a merger filing and possible probe.
But lawyers and industry sources have said it was unlikely
the commission would wave through the largest mining takeover deal to date.
Indeed, it notified the parties on Thursday that it required official
notification of the merger, implying it will consider the two as separate
companies and will examine the deal, instead of leaving it to individual member
states.
Glencore and Xstrata said in a statement they would notify
the commission under EU merger regulations.
"The parties expect the merger between Glencore and
Xstrata not to result in any negative impact on competition in the commodity
markets in which the two companies operate," the two sides said in a
statement.
"In fact, the merged firm is expected to be able to
offer customers a wider range of products and services and provide improved
security of supply to satisfy customer demand."
The office of Competition Commissioner Joaquin Almunia
declined to comment.
"We yet have to be notified officially of this
operation. Until this is the case, we won't make any comment."
The deal is not expected to face major antitrust issues, but
the sheer number of authorities it needs to negotiate with is likely to add to
an already lengthy merger timetable.
Glencore and Xstrata combined become the world's largest thermal coal exporter, and the largest producer of both zinc and ferrochrome. But the picture is complex - in thermal coal, Glencore and Xstrata's export capacity is around 72 million tonnes, but that is less than 10% of the global total - well below the threshold deemed significant by most antitrust authorities.
