2nd UPDATE: Glencore, Xstrata Don't Expect EU Competition Concerns

Glencore International PLC (GLEN.LN) said Friday that it will formally notify the European Commission of its merger proposal with Xstrata PLC (XTA.LN) and said it doesn't expect the commission to raise any competition concerns.

The decision to formally notify the commission, the European Union's executive body, means the deal to create the world's fourth largest diversified miner by market capitalization may not need to be referred to individual EU member states for review. Glencore and Xstrata will now enter pre-notification talks with the commission before making a formal notification of the merger proposal.

"The parties expect the merger between Glencore and Xstrata not to result in any negative impact on competition in the commodity markets in which the two companies operate," Glencore said in a statement. "In fact, the merged firm is expected to be able to offer customers a wider range of products and services and provide improved security of supply to satisfy customer demand."

Once the commission has been notified of the merger proposal, it will have 25 days to review the proposal. It may then extend the review by another 90 days if needed through a second phase review.

Glencore and Xstrata have proposed a merger of equals that would create a commodities juggernaut with a market capitalization, at the time of announcement, of around $90 billion and assets in a wide range of products including oil, base metals, precious metals, shipping and agriculture.

Mining analysts have said the proposed merger is unlikely to present any major anti-trust issues since Glencore, which already owns a 34% stake in Xstrata, already has commercial agreements in place to market several of Xstrata's products.

Liberum Capital said in a note that it estimates the combined company will be the world's largest export thermal coal producer with an 11%-12% market share. It will also be the world's largest refined zinc producer with a 10% market share and the world's third largest mined copper producer with a 7%-8% market share.

"Whilst the combination gives the merged entity dominant global positions in mined supply, our initial take is no commodity concentration should raise a red flag," Liberum said in a note. "We see no reason as yet to suggest a block."

Glencore and Xstrata will also seek regulatory approval from China, South Africa and Australia for the proposed merger.

-By Alex MacDonald, Dow Jones Newswires; 44 20 7842 9328; alex.macdonald@dowjones.com

Glencore Xstrata (PK) (USOTC:GLCNF)
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