Huge job losses expected as Glencore-Xstrata merger done

After some delays and missed deadlines, Xstrata merged with the Swiss commodities trader Glencore Group overnight, forming a resource giant under the name of Glencore Xstrata plc.

Glencore chief executive Ivan Glasenberg said the number of job losses from the restructure is ‘going to be big’ but would not specify how many jobs would be lost, according to Fox Business.

“For the vast majority of employees, particularly those involved in the key front-line processes of production and marketing, there should be little impact on your day-to-day activities,” Glasenberg said in a letter to employees.

"Those who will be affected within the various management structures will be notified directly and as soon as practicable."

In an interview with The Wall Street Journal, Glasenberg said it would take up to five years to see whether the merger is a success, depending on the integration plan and the performance of commodity prices, particularly coal.

“Did I pay the right price? Am I going to be able to jell these things, will the commodity markets remain strong so that it will justify putting all of this money into an asset rich company? It’s my biggest fear,” he said.

The new company will be listed on the London and Hong Kong Stock exchange, the company said in a statement. The London listing is expected to take effect today at 8am, London time while the Hong Kong listing will happen on May 6 at 9:30am Hong Kong time.

The listing of Xstrata will be cancelled from the London stock exchange at the same time. A secondary listing on the SIX Swiss Stock Exchange will take effect May 6.

As of Thursday, ‘the entire issued ordinary share capital of Xstrata is owned by the Glencore Group’, with the new name to come into effect in Jersey later on Thursday, Glencore said in a statement.  

Shareholders will receive 3.05 new Glencore shares for each share they hold at present. Xstrata’s former non-executive director John Bond will be its chairman, while Glasenberg will continue in his role in the new company.

Glencore has a 100-day integration plan which involves elimination of job duplication and head offices at Xstrata’s five business units. According to Glasenberg, the restructuring will take 30 days to finish, with remaining days spent on extracting value from the portfolio assets.

Xstrata had confirmed in February last year it was in talks with Glencore to form a $US82 billion merger company.

But Glencore missed its deadline to raise its £18 billion offer in August 2012. In April this year, the two companies announced another delay to the merger after regulation and court proceeding stalled the deal.

Xstrata said the merger was waiting for outstanding regulatory approval in China and the conclusion of court processes.

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