By Vanessa Mock and Alex MacDonald
LONDON--The European Commission is concerned that the proposed
merger between Glencore International PLC (GLEN.LN) and Xstrata PLC
(XTA.LN) could reduce competition in the European zinc metal market
and has requested that Glencore provide remedies by midnight
Tuesday if it wishes to keep to its timetable, three people
familiar with the matter said Tuesday.
Glencore and Xstrata are seeking regulatory and shareholder
approval for a proposed tie-up that would create the world's
fourth-largest diversified miner with a market capitalization of
about $70 billion. From a regulatory perspective, only the European
Commission and China's Ministry of Commerce still have to render a
verdict.
The two regulators are trying to assess whether the combination
of the two companies would lead to the concentration of power in
the hands of a few players who could potentially set the price for
certain commodities.
An EU person familiar with the negotiations confirmed that the
European Commission, the body responsible for reviewing EU
competition issues, identified concerns related to the combined
company's market share in zinc metal.
The person wasn't able to say whether Glencore had submitted any
concessions as yet but said: "We fully expect them to submit
remedies by the close of Tuesday." Two other people familiar with
the matter voiced similar views.
The three people said they expected the Commission to announce
Wednesday morning that the regulator would extend its review
deadline from Nov. 8 to Nov. 22 in order to give itself more time
to assess whether any concessions from the companies go far enough
in addressing its concerns.
Glencore and Xstrata have argued to EU regulators that the zinc
metal market is global and the deal should be reviewed within that
context. The European Commission previously ruled in Xstrata's 2006
Falconbridge purchase that the zinc market was regional.
Glencore and Xstrata would have a combined market share of about
50% in European zinc metal, according to Macquarie Research
calculations. This compares to a 9.1% market share in the global
zinc metal market, according to UBS calculations.
-Write to Alex MacDonald at alex.macdonald@dowjones.com
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