Glencore, Xstrata and the Restructuring of the Global Copper Mining Industry in 2012

Published 27 May 2013
Reference 5916
Topic Strategy
Industry Mining & Metals
Region Global
Length 40 page(s)
Language English

In 2012, Glencore, one of the world’s largest commodity traders, proposed to take over the mining company Xstrata. Stocks of both companies surged by more than 10% following the deal's announcement, lauded by analysts as unprecedented: “Glencore provides the marketing and Xstrata the operational base. It could be a new model for the industry, although it would be difficult to replicate by others.” However, the vertical integration move was contested by many shareholders, including Qatar Holding. The case chronicles the organization and economics of the copper industry and its supply chain, the different business models and competitors, and the development of Glencore till the proposed merger.

Teaching objectives

The case offers an ideal setting to study various theories and determinants of vertical integration: industry life-cycle effects, transaction costs, market power/opportunistic behavior. It also illustrates the use of vertical integration for various arbitrage mechanisms. The data provided allows students to translate the strategy analysis of the possible benefits and costs of the merger into a pricing exercise for the take-over.

  • vertical integration
  • merger
  • global strategy
  • market power
  • arbitrage
  • take-over
  • supply chain management
  • acquisition price
  • Q31213