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Investors should hold fire over Glencore and Xstrata merger
As Glencore and Xstrata formally announce a 90bn merger deal Sheridan Admans, investment research manager at The Share Centre, explains what this means for investors.
“It is assumed the merger deal announced today would give the new company a unique business model as a fully integrated commodities value chain mining company. The company would provide operations from mining and processing, storage, freight and logistics to marketing and sales. According to Xstrata the tie up should allow scale of production to produce and extract metals, oil and grain in five continents.
“Stand alone, Xstrata has attractions for investors and this morning announced good full year results. However, we continue to maintain our ‘hold’ recommendation until further information is announced. Investors should be mindful there may still be resistance to the merger from shareholders who believe the current offer undervalues future earnings and assets, which could lead to an improved deal. Regulatory authorities could also impose barriers.
“At present we have a ‘sell’ recommendation on Glencore. As the nature of the deal is an all-share merger investors should hold out for the best possible deal when considering selling Xstrata. As any renewed offer can change the position of shareholder interests we would suggest investors watch this very closely. We believe this could rumble on for some time.”
THIS DATA IS PROVIDED BY THE SHARE CENTRE. THIS IS NOT INTENDED TO CONSTITUTE AN OFFER OR AGREEMENT TO BUY OR SELL INVESTMENTS.
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Back2012-02-07 15:15:38 © Moneyextra.com