February 7, 2012 6:27 PM

Magic Circle Firms Lead on $41 Billion Mining Deal

Posted by Tom Huddleston Jr.

Glencore International, the world's largest commodities trader, will pay $41 billion in stock to take over Swiss mining giant Xstrata, the companies announced Tuesday.

The combined entity—to be renamed Glencore Xstrata—would have a market valuation of nearly $90 billion, making it one of the world's largest mining concerns.

As The Am Law Daily previously reported, Xstrata confirmed last week that the two companies were in merger talks that, it turns out, they had code-named "Everest." Glencore, which already holds a 34 percent stake in Xstrata, will issue 2.8 shares of its stock for each Xstrata share it doesn't already own, according to the companies' announcement. 

Reuters reports that the deal would create one of the world's largest exporters of coal, its largest producer of zinc, and its third-largest copper miner. The Wall Street Journal suggests that the deal could spur further acquisitions by such mining industry players as Rio Tinto and BHP Billiton.

For legal advice on the transaction, Glencore turned to its longtime counsel, Linklaters. The firm's team includes London-based corporate partners Charles Jacobs and David Avery-Gee, as well as former global banking head John Tucker and banking partner Toby Grimstone. Linklaters advised Glencore last year on the company's $12 billion initial public offering. 

Richard Marshall, a former partner at Cadwalader, Wickersham & Taft, is general counsel for Glencore;  Benny Levene serves as Xstrata's chief legal counsel.

Freshfields Bruckhaus Deringer is advising Xstrata on the matter, with a team led by corporate partners Julian Makin and Piers Prichard Jones. The two are supported by corporate partner Stephen Hewes, along with benefits partner Jocelyn Mitchell, competition partner Rafique Bachour, banking partner Edward Evans, and tax partner Jonathan Cooklin.

Freshfields previously represented Xstrata in connection with its unsuccessful takeover bids for rivals Anglo American and Lonmin.

Glencore and Xstrata are both based in Zug, Switzerland, a popular base for commodity traders because of its low taxes. The companies share a common history as Xstrata formed when it bought Glencore's coal assets in 2002.

Norton Rose antitrust partner Marc Waha told Bloomberg last week that a merger of the two companies may take up to a year to run through what are sure to be complex regulatory issues. The deal could require approval in the many countries where the companies have assets or customers, including Australia, Brazil, Canada, Japan, and South Korea. Approvals would be needed from the United States, the European Union, and China, Waha told Bloomberg.

The deal already faces opposition from some Xstrata shareholders, according to The New York Times. Those investors say the transaction benefits Xstrata management while undervaluing the mining company. Executives at Schroders Plc and Standard Life Investments—which hold 1.5 percent and 2 percent stakes in Xstrata, respectively—say they will vote against the transaction, according to the Times.

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