Concern over the possible break-up of the deal between Glencore and Xstrata is overdone, says Bank of America Merrill Lynch.
The firm says wider market concerns on executive retention packages, while relevant, may be distracting market participants from the key deal issues. On the one hand, BofA-Merrill thinks Glencore would gain the following from Xstrata: its balance sheet, materials flow, scale for further M&A and an eventual exit for Glencore partners.
However, based on negative mark-to-market on Xstrata EPS estimates, says there could be material downside to Xstrata shares if the deal doesn’t complete.
“Thus we see the most likely outcome as the deal completing,” BofA-Merrill concludes.
Shares of both are dropping more than 4% today.
- Analysts say Glencore does not need to raise bid to succeed in Xstrata deal (guardian.co.uk)
- Xstrata chief’s big payday should be tied to performance (guardian.co.uk)