Glencore/Xstrata Merger Faces Delay Over Chinese And South African Approval

Mining Giants Mega Merger Delayed

Mining and commodity giants Glencore and Xstrata have been forced to extend the deadline for their much publicised merger until March 15 due to a delay in gaining approval in China and South Africa.

The $33 billion (£22.5bn) merger process needs regulatory approval from the two nations in order to proceed; it has already received conditional approval from Europe.

The new date comes after Glencore's publication of year end results on 5 March.

Glencore owns ships than the British Royal Navy and handles 3% of the world's oil consumption through its operations in 40 countries from Australia to Argentina.

Xstrata meanwhile employs more than 70,000 people in 20 countries and is one of the largest producers of the top seven commodities used in manufacturing and production.

Its activities have sparked protests in countries including the Dominican Republic and Peru - where two demonstrators died - and the latest meeting of the Xstrata board also attracted opponents, some carrying a placard saying: "Your money kills", but nobody expects that to scupper a potential deal.

A merger would see the new company become the number one producer of coal, zinc and lead - with the possibility of it also becoming the biggest independent producer of copper.

Paul McKnight, investment manager at stockbroker Redmayne-Bentley, told The Huffington Post UK in October 2012 there was a possibility the merged entity could become difficult to regulate.

"The proposed merger is subject to regulatory approval, however given the size of the merged company and its global structure there is a danger that a monopoly similar to Microsoft's domination of their market could result," he explained.

"If the mining company (in this case Xstrata) is the dominant or major supplier in a particular resource, then the commodities trading side of the company (Glencore) could manipulate resource production to the benefit of its own book - this is a particularly tricky area for the regulatory authorities and the outcome of the regulatory approval will make for interesting reading."

However, given Xstrata deals in so-called 'hard commodities' or base metals, and not the 'soft commodities' such as wheat, coffee and sugar, the commodity trading side of the company should not have any more influence on food stuff prices than it currently has, McKnight added.

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