LONDON Financier Nathaniel Rothschild, wants commodity trading group Glencore International GLEN.UL, in which he owns a $40 million (26.5 million pound) stake, to merge with mining group Xstrata XTA.L to create more value.
"I think that Xstrata and Glencore are two world class businesses and if put together they would be worth a lot more," Rothschild told Reuters in an interview.
Rothschild -- scion of a banking dynasty -- bought $40 million in Glencore convertible bonds last December, when privately held Glencore took the first concrete step to turn itself into a public listed firm.
Swiss-based Glencore, which holds nearly 35 percent of Xstrata, was studying a merger to create a huge mining and trading group, a source close to the situation told Reuters on May 2.
But some Xstrata investors have been wary of a potential merger with Glencore due to the difficulty in valuing the private firm.
Rothschild agrees with analysts who have said Xstrata's shares have been dampened in recent months due to uncertainty over whether it will link up with its biggest shareholder.
"I think Xstrata's valuation has been held back by uncertainty and a merger of the two companies makes abundantly good sense at some point. How they do it is a different question. Ultimately they need to come together," he said.
Some Xstrata investors have called for Glencore to list itself first to establish an market value, but Rothshild has no strong view on which should come first.
"I'm agnostic. I don't think it matters ... Whether it IPOs first, whatever it does, ultimately the two businesses should be put together and the shareholders of both companies would benefit handsomely."
Rothschild, whose new investment mining vehicle Vallar VAAR.L raised $1.1 billion in an IPO on Friday, is a big fan of Glencore, the world's biggest commodity trader.
"I'm very aware of the value of Glencore, it's a unique business model, it is certainly the market leader," he said.
"There's nobody I respect more than (Glencore CEO) Ivan Glasenberg in the mining sector. l think he's a visionary."
(Reporting by Eric Onstad; Editing by Hans Peters)