Why the Glencore-Xstrata merger is alarming governments

Too big to succeed?

First it was Qatar, then South Africa followed by the EU and now China. The largest merger deal commodities history is alarming governments all over the world.

The $76 bn Glencore-Xstrata merger was first announced in February 2012. It was to be the largest corporate deal that year, but was successively held up: First there was Qatar Holdings, a shareholder of both commodities giants, who demanded a higher share price and a cap on the vast payments made to board members. To break the deadlock between Qatar and other investors, Tony Blair was roped in at the last minute to negotiate and a deal was made in November 2012.

The merger of the two Anglo-Swiss companies then had to jump through the hoops at Brussels. To meet the EU’s competition laws, Glencore, the world’s largest commodities company, had to sell its stake in the zinc trader, Nyrstar. Approval was granted in late November 2012.

South Africa was next on the list of countries to console. The state’s Competition Tribunal wanted to limit job losses that the merger would inevitably entail in the resource rich nation. Other concerns regarding coal supplies (85 per cent of South Africa’s electricity is from coal fired plants) were smoothed over and the deal was again approved in January 2013.

Deadlines were set and investors raring to go, but one last government had to be satisfied – China. Glencore and Xstrata – when merged – will control over 10 percent of the world’s copper concentrate supplies. China is the world’s largest copper consumer and this has caused the deal’s current delay – China is obviously concerned about an over-reliance on a Swiss company listed in London.  

One of the larger deals in corporate history now hangs in the balance of Mofcom (the Chinese Ministry of Commerce). Whether they will request – like the EU – that certain assets be dropped to reduce the company’s size and dominance, or flounder under pressure of the two commodity giants and approve the deal outright will set the rules for future mega-deals.

The multinational vs. nation state debate has long been a topic pursued by international relations theorists. But here reality trumps theory: A merged Glencore-Xstrata will be the world’s fourth largest diversified mining company and by far the largest commodities trader. As we have seen, the merged company will hold sway over the resources of the EU, South Africa and China, let alone numerous smaller countries. This deal, then, is critical to both the future of commodities trading and multinationals as a whole. Come May 2nd, the latest date for the merger, we could see either a stagnant deal held at ransom by the Chinese government, or a new power to be reckoned with over the world’s resources.       

Glencore. Photograph: Getty Images

Oliver Williams is an analyst at WealthInsight and writes for VRL Financial News

Photo: André Spicer
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“It’s scary to do it again”: the five-year-old fined £150 for running a lemonade stand

Enforcement officers penalised a child selling home-made lemonade in the street. Her father tells the full story. 

It was a lively Saturday afternoon in east London’s Mile End. Groups of people streamed through residential streets on their way to a music festival in the local park; booming bass could be heard from the surrounding houses.

One five-year-old girl who lived in the area had an idea. She had been to her school’s summer fête recently and looked longingly at the stalls. She loved the idea of setting up her own stall, and today was a good day for it.

“She eventually came round to the idea of selling lemonade,” her father André Spicer tells me. So he and his daughter went to their local shop to buy some lemons. They mixed a few jugs of lemonade, the girl made a fetching A4 sign with some lemons drawn on it – 50p for a small cup, £1 for a large – and they carried a table from home to the end of their road. 

“People suddenly started coming up and buying stuff, pretty quickly, and they were very happy,” Spicer recalls. “People looked overjoyed at this cute little girl on the side of the road – community feel and all that sort of stuff.”

But the heart-warming scene was soon interrupted. After about half an hour of what Spicer describes as “brisk” trade – his daughter’s recipe secret was some mint and a little bit of cucumber, for a “bit of a British touch” – four enforcement officers came striding up to the stand.

Three were in uniform, and one was in plain clothes. One uniformed officer turned the camera on his vest on, and began reciting a legal script at the weeping five-year-old.

“You’re trading without a licence, pursuant to x, y, z act and blah dah dah dah, really going through a script,” Spicer tells me, saying they showed no compassion for his daughter. “This is my job, I’m doing it and that’s it, basically.”

The girl burst into tears the moment they arrived.

“Officials have some degree of intimidation. I’m a grown adult, so I wasn’t super intimidated, but I was a bit shocked,” says Spicer. “But my daughter was intimidated. She started crying straight away.”

As they continued to recite their legalese, her father picked her up to try to comfort her – but that didn’t stop the officers giving her stall a £150 fine and handing them a penalty notice. “TRADING WITHOUT LICENCE,” it screamed.


Picture: André Spicer

“She was crying and repeating, ‘I’ve done a bad thing’,” says Spicer. “As we walked home, I had to try and convince her that it wasn’t her, it wasn’t her fault. It wasn’t her who had done something bad.”

She cried all the way home, and it wasn’t until she watched her favourite film, Brave, that she calmed down. It was then that Spicer suggested next time they would “do it all correctly”, get a permit, and set up another stand.

“No, I don’t want to, it’s a bit scary to do it again,” she replied. Her father hopes that “she’ll be able to get over it”, and that her enterprising spirit will return.

The Council has since apologised and cancelled the fine, and called on its officials to “show common sense and to use their powers sensibly”.

But Spicer felt “there’s a bigger principle here”, and wrote a piece for the Telegraph arguing that children in modern Britain are too restricted.

He would “absolutely” encourage his daughter to set up another stall, and “I’d encourage other people to go and do it as well. It’s a great way to spend a bit of time with the kids in the holidays, and they might learn something.”

A fitting reminder of the great life lesson: when life gives you a fixed penalty notice, make lemonade.

Anoosh Chakelian is senior writer at the New Statesman.