RECOMMENDED ALL-SHARE MERGER OF EQUALS OF
GLENCORE INTERNATIONAL PLC AND XSTRATA PLC
TO CREATE UNIQUE $90 BILLION NATURAL RESOURCES GROUP
7 February 2012
Summary
o The Glencore Directors and the Independent Xstrata Directors have reached agreement on the terms of a recommended all-share merger of equals
o Creation of a major natural resources group with a combined equity market value of $90 billion and a unique business model, fully integrated along the commodities value chain, from mining and processing, storage, freight and logistics, to marketing and sales
o Merger ratio of 2.8 New Glencore Shares for every Xstrata Share held, excluding Xstrata Shares already owned by the Glencore Group, providing Xstrata Shareholders other than Glencore with a 45 per cent. stake in the Combined Entity
o The Merger values each Xstrata Share at 1,290.10 pence and the entire issued and to be issued share capital of Xstrata at approximately £39.1 billion ($61.9 billion) and represents a premium of:
o approximately 15.2 per cent. to Xstrata's closing share price of 1,119.50 pence as at 1 February 2012, being the last business day prior to the announcement by Xstrata that it was in discussions with Glencore; and
o approximately 27.9 per cent. to Xstrata's volume weighted average share price of 1,008.91 pence over the three-month period ended 1 February 2012, being the last business day prior to the announcement by Xstrata that it was in discussions with Glencore
o Combination of two complementary businesses with long-standing links and the logical next step for both companies against a changing industry environment
o Combines the premier global commodities marketing business and a world-class operator of metals and mining assets, each with outstanding track records of growth and value creation, and integrates two portfolios of assets and projects with industry leading growth prospects and combined production growth of 11 per cent. on a compound annual basis to 2015
o Combined Group will have a significant and expanded operational footprint, including positions in the next major regions for mining investment, including African copper-belt, Kazakhstan and South America
o Creates substantial new optionality and greater strategic and financial flexibility
o Combined Group will benefit from enhanced scale and market positions in the production and marketing of key commodities, as well as an industry-leading diversification profile by commodity and which improves cash flow diversification
o Proven management team to be led by current Xstrata CEO, Mick Davis, as CEO of the Combined Group, Ivan Glasenberg, current Glencore CEO, as Deputy CEO and President, Trevor Reid, current Xstrata CFO, as CFO and Steven Kalmin, current Glencore CFO, as Deputy CFO
o Combined Group will benefit from a robust corporate governance structure with an aligned strategy to create superior shareholder value. Sir John Bond, current Xstrata non-executive Chairman, will be nominated as non-executive Chairman of the Combined Group and the Combined Group's Board will also include Mick Davis, Ivan Glasenberg and a further eight non-executive directors, four from each of Xstrata and Glencore's current Boards
o Glencore and Xstrata management teams will be deployed according to their key strengths. Operating assets will be integrated into the existing Xstrata business units, while marketing will be managed by the existing Glencore management teams
o Best in class sustainability and operating expertise to be applied across the Combined Group's operations to underpin access to natural resources and a social licence to operate
o Estimated annual EBITDA synergies of at least $500 million in the first full financial year of the Combined Group, predominantly marketing related
o Expected to be earnings per share accretive to Xstrata Shareholders in the first full financial year of the Combined Group1
o For the 12 months ended 31 December 2011, Glencore generated revenues of $186.2 billion and adjusted EBITDA (before exceptional items) of $6.5 billion2
o For the 12 months ended 31 December 2011, Xstrata generated revenues of $33.9 billion and EBITDA (before exceptional items) of $11.7 billion3
o On a combined basis for the year ended 31 December 2011, the Combined Group would have generated revenues of $209.4 billion and adjusted EBITDA of $16.2 billion4
o The Merger will be effected by means of a Court sanctioned scheme of arrangement of Xstrata under Part 26 of the UK Companies Act, pursuant to which Glencore will acquire the entire issued and to be issued ordinary share capital of Xstrata not already owned by the Glencore Group
