Jun 27 2012
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Financial News: M&A Market Faces Steep Fall As Glenstrata Teeters
Wednesday, Jun 27, 2012
By Matt Turner
Of FINANCIAL NEWS
The European mergers-and-acquisitions market could be set for a crashing fall if shareholders in the Anglo-Swiss miner Xstrata (XTA.LN) vote to block its tie-up with the commodities giant Glencore International (GLEN.LN).
Xstrata and Glencore, which agreed a deal valued at $48.4 billion in February, are under pressure to amend the agreement due to investor unrest over the price and execution retention packages.
Yesterday, Qatar Holding, which is Xstrata's biggest shareholder behind Glencore, said that while it recognises the strategic rationale for a deal, it is seeking improved terms. The current agreement envisages a share swap ratio of 2.8 new Glencore shares for every Xstrata share, but Qatar has said it believes an exchange ratio of 3.25 would be more appropriate.
A collapse of the deal would represent a significant blow for nine advisory banks involved - Goldman Sachs, Deutsche Bank, Nomura, JP Morgan, Barclays, Citigroup, Morgan Stanley, BNP Paribas and Credit Suisse - but would also spell bad news for the broader M&A market.
However, on stripping out the Glencore-Xstrata deal, the decline is even more precipitous. Europe-targeted M&A, at $306.6 billion, would be on course to be the lowest first half total since 2004, and down more than a third on the first half in 2001. Global volumes, at $1.47 trillion, would be set to down around 22%.
The deal, and its potential collapse, could also spark changes in the advisory league tables. The top eight in the Dealogic's global league table would retain their position, but Nomura would drop out of the top 10 in the league table, with Rothschild moving to ninth.
In Europe, the advisory league tables would be significantly reshaped, with Goldman Sachs, JP Morgan, Barclays and Citigroup all losing one or more places in the rankings, with Citi dropping out of the top 10 altogether.
Beneficiaries in Europe would include Rothschild, which would move to third in the table, Bank of America Merrill Lynch, which would move to fifth, and Lazard, which would rank sixth.
Web site: http://www.efinancialnews.com/story/2012-06-27/mergers-market-collapses-xstrata-glencore
(END) Dow Jones Newswires
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