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Is South32 in Glencore’s cross hairs?

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World Coal,

South32 – the company formed from BHP Billiton’s unwanted silver, manganese, aluminium and coal assets – could be a potential takeover target for Swiss commodities behemoth, Glencore, as it seeks to expand its mining empire.

As rival mining companies focus on saving cash and streamlining their businesses during the prolonged downturn in commodity prices, Glencore’s CEO Ivan Glasenberg has a “free pass” to bid on assets, Paul Gait, a mining analyst at Sanford C. Bernstein & Co., told Bloomberg. “Looking at it from Ivan’s perspective, I’d be thinking the current downturn isn’t going to last. It never does,” Gait continued.

And South32 would be a good fit with Glencore’s existing business, James Santo, a special situations sales trader at Aviate, told Bloomberg, as the Swiss giant is already dominant in all of the core commodities that the new company will produce.

The spin off of South32 should be complete in June of this year with shares trading in Australia and South Africa.

Glencore may not be only suitor for South32, however. X2 Resources, a private investment fund established Mick Davis, has a US$4.8 billion war chest and is in the market for mining assets – which could set up an interesting battle. Davis was forced out of his previous job as CEO of Xstrata by Glasenberg when Glencore took over the company in 2013.

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