Wealth Manager - the site for professional investment managers

Register for full access to Citywire’s Fund Manager database, news and analysis. Registration is free and only takes a minute.

Henderson: why we changed our minds on Glencore-Xstrata

Henderson: why we changed our minds on Glencore-Xstrata

Henderson’s John Griffiths says he initially rejected the Glencore-Xstrata tie-up, but now believes improved terms on the deal could mean the merger is beneficial to both parties.

The European Commission cleared the deal yesterday, outlining conditions for Glencore to go ahead with the $33 billion takeover of Xstrata.

Griffiths, the director of multi-strategy equities at Henderson, said the deal originally undervalued Xstrata, at 2.8 times Glencore shares per Xstrata share, while the benefits to Glencore were considerable.

‘So we were therefore pleased when the offer was raised to 3.05 times just prior to the deadline, after - we are led to believe - talks between Glencore and Xstrata’s largest shareholder, the Qatar Investment Authority, led to a deal mediated by former Prime Minister Tony Blair,’ said Griffiths.

‘Although not the top price we had hoped for, given the value we had placed on Xstrata, we did eventually support the deal, when weighing up the pros and cons and are pleased the deal seems likely to complete soon,’ he added.

On these improved terms, Griffiths said the deal is beneficial to both Glencore and Xstrata, and would financially boost the former, as the commodities trader would receive a steady source of near-term cash-flow while gaining from Xstrata’s stronger balance sheet.

‘A merger would provide a better balance between real productive assets, of which Xstrata has plenty of top class, low cost mines in diversified minerals, to Glencore’s predominance in marketing,’ said Griffiths.

‘Glencore also brought some advantages to Xstrata, especially its logistical skills in transporting product from mine to customer, and the great potential for gaining more customers for Xstrata’s product given their global marketing network,’ said Griffiths.

He added Glencore has potential new assets coming on stream in due course, which could add to longer term growth potential.

‘So the overall package as a holder of the soon to be combined company looks attractive, giving us exposure to a dynamic, multi asset, geographically balanced and vertically integrated  company with critical mass.’

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
Play Investment Pulse: the highs and lows of 2014

Investment Pulse: the highs and lows of 2014

This week's Investment Pulse looks back at some of the biggest stories of the year as well as looking forward to 2015.

Play Inside ETFs: Why the US bull-run still has legs

Inside ETFs: Why the US bull-run still has legs

Global equities suffered a sharp sell-off in the third quarter but exchange traded fund investors are continuing to back the US to outperform in 2015

Play Paul Niven: I won't rip up the Foreign & Colonial Trust history book

Paul Niven: I won't rip up the Foreign & Colonial Trust history book

The newly appointed manager of the Foreign & Colonial trust talks about his plans for UK's oldest investment company.

Your Business: Cover Star Club

Manchester wealth firm hires Coutts director for London launch

Manchester wealth firm hires Coutts director for London launch

Former Coutts director Tony Robinson has joined Chartered Wealth Management to head the company’s newly opened London office.

Wealth Manager on Twitter