Xstrata, Glencore shake hands on $90bn merger

London - Glencore and Xstrata agreed an all-share merger worth $90bn on Tuesday in the industry's largest ever deal, creating a commodities powerhouse spanning mining, agriculture and trading.

Glencore, the world's largest diversified commodities trading house, will issue 2.8 new shares for each Xstrata share in a deal they said was a "merger of equals".

The ratio is a 15.2% premium to Xstrata shareholders compared with its share price last Wednesday before word leaked out about the merger talks, a joint statement said.

"A merger between Glencore and Xstrata offers a unique opportunity to create a new business model in our industry to respond to a changing environment. It is the logical next step for two complementary businesses," said Xstrata chief executive Mick Davis, who will be CEO of the enlarged Glencore.

Glencore CEO Ivan Glasenberg will be deputy CEO and Xstrata chairman John Bond will retain his post.

Xstrata shareholders other than Glencore, which already has a 34% stake in the mining group, will hold 45% of the new group.

Bringing together Xstrata, the world's fourth-biggest diversified miner, and Glencore will create a group looking to ride an extended surge in demand in coming years for commodities from China and other emerging nations.

As the world's biggest exporter of coal for power plants and a top copper producer, the combined firm aims to have the bulk to compete with mining sector leaders BHP Billiton [JSE:BIL], Vale and Rio Tinto.

On Monday, Xstrata shares closed down 1.7% while Glencore declined 4.5%, against a 1.0% fall in the sector, with both still above the level they were at before the potential deal was announced.