February 2, 2012 / 2:23 PM / in 7 years

Glencore, Xstrata turn to trusted banking stars

LONDON (Reuters) - An elite club of bankers traditionally close to London’s mining companies stand to earn their firms a share of a $140 million fee pot if the proposed merger between Glencore and Xstrata succeeds.

Banking teams advising Glencore Chief Executive Ivan Glasenberg and Mick Davis of Xstrata can expect payouts of between $50 million to $70 million, according to estimates from Thomson Reuters and Freeman Consulting, for helping their clients pull off the industry’s biggest deal to date.

If they fail to gauge a merger premium that will win over Xstrata’s full shareholder register, however, they will receive only 10 percent of the potential revenue.

Glencore already owns 34 percent of Xstrata, which means less work for the advisers, but has also capped potential fees 20 to 30 percent lower than an average deal of this size.

Mining group Xstrata and Glencore, the world’s largest diversified commodities trader, are in talks over an all-share deal that would create a group worth 50 billion pounds ($79.10 billion).

Both sides have called in tried and tested advisers, who have worked closely with them over the years, sometimes at the expense of lucrative business from the other company.

Glasenberg has called on Citigroup and Morgan Stanley, people familiar with the matter said, two of the bank’s that led Glencore’s $10 billion IPO in May, which yielded about $300 million to $400 million for advisers involved.

Credit Suisse, also a top bank on the IPO, may be added to the roll call at a later stage, but does not yet have a role, the people said.

Citi’s contingent is expected to include David Wormsley, the senior UK banker best known for his court battle with Guy Hands over the private equity firm’s controversial purchase of music group EMI.

Michel Antakly, who advised Alcan on its 4.3 billion euro ($5.66 billion) takeover of Pechiney in 2003 and worked on Arcelor’s defense in 2006 against Mittal, will play a pivotal role at Morgan Stanley.


Xstrata’s Davis has compensated Deutsche Bank, Goldman Sachs and JP Morgan for missing out on a slice of the Glencore IPO fees last year.

All three are major players in equities capital markets but could not take part in Glencore’s listing because they were so close to Xstrata.

Nomura is also working for Xstrata via a team led by joint investment banking head William Vereker. Vereker advised Brazil’s Vale on its failed attempt to buy Xstrata in 2008, when he was with Lehman.

Deutsche Bank and JP Morgan are Xstrata’s longstanding corporate brokers and have counseled Davis on almost every major deal or fundraising.

Ian Hannam is a main contact at JP Morgan, while natural resources head Nigel Robinson will play a key role for Deutsche.

Robinson was also one of the bankers involved in the $41 billion deal that created ArcelorMittal, as well as Xstrata’s $18 billion dollar acquisition of Falconbridge.

He left Goldman Sachs to join Deutsche in 2007, the opposite career path to Brett Olsher, who left Deutsche to become a partner at Goldman in 2010. ($1 = 0.6321 British pounds) ($1 = 0.7592 euros)

Additional reporting by Clara Ferreira-Marques; Editing by Jon Loades-Carter and David Cowell

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