Glencore International

The Glencore Xstrata deal, an all-share merger creating a $90 billion global mining industry powerhouse, would be the sector's biggest and could trigger the busiest year for M&A activity.

The companies announced the deal today (Tuesday) following Glencore's offer last week. Glencore would pay $41 billion for the rest of Xstrata's shares (Glencore already has a 34% stake).

Glencore International is the world's largest publicly traded commodities supplier, and Xstrata is the world's fourth-largest metals and mining company. A Glencore Xstrata deal would create a company rivaling global mining industry leaders BHP Billiton Ltd (NYSE ADR: BHP) and Rio Tinto Plc (NYSE ADR: RIO).

"Glencore being such a dominant trader and marketer of commodities, and Xstrata being such a strong operator of difficult assets, I think it creates enormous value," Prasad Patkar from Platypus Asset Management Ltd. told Bloomberg News. "On one end you have great mining expertise, on the other you've got great marketing expertise. Two and two together should make five."

The new combined entity would be more diversified than other global commodities players, with copper and coal being its biggest earnings drivers. It would be the world's biggest coal exporter for power plants and the top integrated zinc producer.

The new mining industry giant also will go on the hunt for smaller businesses, and encourage other powerful players to do the same.

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