* Glencore to scrap Nyrstar European sales deal
* Also to sell 7.8 pct stake
* Chinese, South African regulators are final hurdles
* Glencore shares up 2.4 pct
By Foo Yun Chee
BRUSSELS, Nov 22 (Reuters) – Europe’s antitrust regulator
has outlined more modest than expected conditions for trader
Glencore International Plc to press ahead with its $33
billion takeover of Xstrata Plc.
The European Commission (EC) cleared the world’s largest
diversified commodities trader to complete the deal but said on
Thursday it must scrap an exclusive European zinc sales
agreement with producer Nyrstar.
In the months during which Brussels examined Glencore’s
tie-up with Xstrata, the EU’s worries – and those of influential
steelmakers’ association Eurofer – had centred on zinc. Used in
metal alloys and to prevent corrosion, it is a metal where
Glencore and Xstrata would be particularly strong as a combined
entity.
The Nyrstar move will cut the combined entity’s share of the
European zinc market from roughly half to below 40 percent, the
threshold which triggers antitrust concerns. The deal between
Glencore and Nyrstar accounts for some 350,000 tonnes of
European zinc a year, according to trade sources.
Glencore must also sell its 7.8 percent stake in Nyrstar,
worth roughly $70 million at current prices, in order to proceed
with its ambition of creating a mining and trading giant.
As indicated by sources familiar with the matter on
Wednesday, though, no asset sales are required.
STEP CLOSER
“We are somewhat surprised by the leniency of the EC, but
not at all surprised that this transaction has ultimately been
approved by Brussels,” Jefferies analysts said in a note.
“Today’s EU approval brings this proposed merger one step closer
to completion.”
Glencore had been expected to be forced to sell an asset,
such as Xstrata’s Nordenham zinc smelter in Germany or even its
San Juan de Nieva plant in Spain, the world’s largest. It had
offered up the German smelter after the Commission said the
original Nyrstar proposal was not sufficient, sources familiar
with the matter said last week.
“The proposed remedy ensures that competition in the
European zinc metal market is preserved, so that European
customers such as steel galvanisers and carmakers can continue
to produce valuable consumer goods at low prices and good
quality,” EU Competition Commissioner Joaquin Almunia said.
The EU antitrust authority said Glencore also pledged not to
buy zinc, either directly or indirectly, from Nyrstar for 10
years, and agreed not to take any action to restrict Nyrstar’s
ability to compete with it in Europe during that period.
Nyrstar, which will have to seek a new sales partner or
rebuild a sales and marketing function, said it was already in
talks with Glencore to seek a deal to end their contract, which
was extended to 2018 only last year.
Candidates to take over the offtake include rival traders
Trafigura and Traxys, trade sources have said.
Glencore must now clear antitrust hurdles in China and
secure a final approval from South African authorities.
Investors gave their backing to the deal earlier this week.
Glencore shares were up 2.4 percent at 342.1 pence by 1509
GMT.
