LONDON--Glencore International PLC (GLEN.LN, GLNCY, 0805.HK)
entered Monday into a new transaction under which the giant
commodities company will purchase a smaller stake in Kazakhstan's
largest integrated zinc producer, Kazzinc, from partner Verny
Capital in a deal that involves less cash.
The revised terms have been agreed to at a time when
mergers-and-acquisition activity in the mining sphere has ebbed,
due in part to a recent drop in commodity prices and concerns about
the health of the global economy.
Glencore's M&A appetite, however, has been an exception to
this trend, evidenced by the company's plan to purchase
Canada-based grain company Viterra Inc (VT.T, VTRAF) for 6.1
billion Canadian dollars (US$6.2 billion) and its announced merger
with Xstrata PLC (XTA.LN) to create a massive mining company with a
market capitalization of more than $70 billion. Both deals are
expected to close before the end of the year.
The Baar, Switzerland-based commodities trader and producer said
it has now agreed to boost its stake in Kazzinc to 69.61% from the
current 50.7% for no more than $1.395 billion in shares and cash,
the final mix of which will be determined by Glencore.
This marks a change from its previously announced deal in the
first half of 2011 whereby Glencore agreed to buy Kazzinc shares
from Verny in a deal that would have boosted Glencore's Kazzinc
stake to 93% for a total of $3.2 billion, including $2.2 billion in
cash and $1 billion in new shares issued at Glencore's May 2011 IPO
price. The transaction also included an option that would have
boosted Glencore's Kazzinc stake to 99.4%, conditional upon the
successful spinoff of Kazzinc's gold assets.
Glencore didn't provide a reason for terminating the original
agreement and signing a new one. A Glencore spokesman declined to
comment on the matter.
Under the new deal, Glencore has agreed to issue 176.2 million
Glencore shares to Verny Capital at the value of Glencore's shares
close to when the deal is finalized. Glencore also agreed to pay an
additional sum of Glencore shares and/or cash that will be capped
at a value of $400 million. Glencore has sole discretion to
determine the mix of cash and shares to be paid.
The commodities titan said it won't pay more than $1.395 billion
for the additional 18.91% Kazzinc stake, meaning the extra sum of
up to $400 million could be less depending on the value of the
176.7 million Glencore shares at the time the deal closes.
The deal is expected to close before the end of the year,
subject to certain conditions, including approval from the Kazakh
government.
Kazzinc has an annual production capacity of 300,000 metric tons
of zinc, 130,000 tons of lead and 240,000 tons of copper
concentrate. It also can produce 1.5 million ounces of gold and 45
million ounces of silver annually.
Write to Alex MacDonald at alex.macdonald@dowjones.com
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