* Mid-caps likely to be focus of MA activity
* Combined group seen likely to sell stake in Lonmin
By Clara Ferreira-Marques and Victoria Howley
LONDON, Feb 3 (Reuters) – Glencore’s
earlier-than-expected move on mining group Xstrata could
indicate that mining company valuations have reached a bottom,
getting bankers excited about the prospect of a revival in
merger activity.
Glencore is already Xstrata’s biggest shareholder and a deal
has been expected since the commodities trader went public in
2011.
But coming just a year after the bumper $10 billion listing,
and after a dismal performance in Glencore’s shares, it is being
read as an indication that the time could now be right for more
mining deals, with valuations low and cash piles high.
“It reinvigorates the sector,” said Liberum analyst Dominic
O’Kane.
A combined Glencore-Xstrata, is expected itself to retain
the appetite for deals, particularly in areas it has earmarked
for growth, like iron ore. And a sharp drop in Glencore’s
borrowing costs – the cost of insuring its debt has come off by
almost a third this week – will certainly make it easier for the
company to borrow.
Some are even speculating that the merged group could take
another swing at mining group Anglo American, under
pressure from its larger peers and embroiled in a potentially
damaging legal battle in Chile.
Continued…
