Glencore, Xstrata and the Restructuring of the Global Copper Mining Industry
Glencore, Xstrata and the Restructuring of the Global Copper Mining Industry in 2012
Diana Alvarez Valencia (1310200)
University Canada West
Dr. Paul Rome
MGMT 661
Strategic Management
Tuesday, May 12, 2015
Introduction and Problem Identification In this case study we will identify the problems that can be issued in the process of the merger between two of the largest commodities traders in the world, Glencore and Xstrata. It will provide the background of both companies, the situation analysis, identification of alternatives
Companies Background.
Glencore had been a trading company since their early years with the name of Marc Rich & Co. Glencore, was founded by March Rich; Rich was a consummate dealmaker, doing business with the entire world no matter their country background (fascist or communists). Moreover, Marc Rich always tried to get the cheapest price with his Middle Eastern contacts. His most important clients were embargoed nations like Israel and South Africa. In 1983, the US government indicted Rich on charges of illegal trading and tax evasion. After different issues and in the sake of create a better reputation the company – Marc Rich & Co. - rebranded itself as Glencore. (Hitt, Ireland & Hoskisson, 2013). Furthermore, one of the Glencore’s practices, is to get cheap tier 2 assets from doing business in developing countries considered high-risk by others rather than developing on its own. In 2002, Glasenberg become the CEO of the company.(Hitt, Ireland & Hoskisson, 2013).
On the other hand Xstrata, is a multinational mining company. It is a major producer of coal, copper nickel, and zinc. It has operations in 19 countries, across Africa, Asia, Australia, Europe, North America, and South America and Mick Davis had been its CEO that had transformed Xstrata from a nearly bankrupt firm into a billion international giant. (Hitt, Ireland & Hoskisson, 2013). Both of the companies were based in Switzerland; On of the core values of each companies
Diana Alvarez Valencia (1310200)
University Canada West
Dr. Paul Rome
MGMT 661
Strategic Management
Tuesday, May 12, 2015
Introduction and Problem Identification In this case study we will identify the problems that can be issued in the process of the merger between two of the largest commodities traders in the world, Glencore and Xstrata. It will provide the background of both companies, the situation analysis, identification of alternatives
Companies Background.
Glencore had been a trading company since their early years with the name of Marc Rich & Co. Glencore, was founded by March Rich; Rich was a consummate dealmaker, doing business with the entire world no matter their country background (fascist or communists). Moreover, Marc Rich always tried to get the cheapest price with his Middle Eastern contacts. His most important clients were embargoed nations like Israel and South Africa. In 1983, the US government indicted Rich on charges of illegal trading and tax evasion. After different issues and in the sake of create a better reputation the company – Marc Rich & Co. - rebranded itself as Glencore. (Hitt, Ireland & Hoskisson, 2013). Furthermore, one of the Glencore’s practices, is to get cheap tier 2 assets from doing business in developing countries considered high-risk by others rather than developing on its own. In 2002, Glasenberg become the CEO of the company.(Hitt, Ireland & Hoskisson, 2013).
On the other hand Xstrata, is a multinational mining company. It is a major producer of coal, copper nickel, and zinc. It has operations in 19 countries, across Africa, Asia, Australia, Europe, North America, and South America and Mick Davis had been its CEO that had transformed Xstrata from a nearly bankrupt firm into a billion international giant. (Hitt, Ireland & Hoskisson, 2013). Both of the companies were based in Switzerland; On of the core values of each companies
References: Hitt, M. A., Ireland, R., & Hoskisson, R. E. (2013). Strategic management: concepts and cases: competitiveness & globalization / Michael A. Hitt, R. Duane Ireland, Robert E. Hoskisson. Australia ; Mason, Ohio : South-Western / Cengage Learning, c2013. Devos, E., Kadapakkam, P., & Krishnamurthy, S. (2009). How Do Mergers Create Value? A Comparison of Taxes, Market Power, and Efficiency Improvements as Explanations for Synergies. Review Of Financial Studies, 22(3), 1179-1211. Madiwe, J. (2014). Ownership structure, inside ownership and firm performance. OECD (2004). OECD principle of corporate governance. Paris: OECD. Pikula, D. A. (1999). Mergers and acquisitions: organizational culture & HR issues. IRC Press. Weber, Y. (1996). Corporate cultural fit and performance in mergers and acquisitions. Human relations, 49(9), 1181-1202.