Glencore tells Xstrata investors its bid is final

Mon Sep 10, 2012 8:07am EDT
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By Clara Ferreira-Marques and Sophie Sassard

LONDON (Reuters) - Commodities trader Glencore laid out what it said was a final $36 billion takeover offer for Xstrata on Monday, warning the miner's investors it would not improve the terms again after making concessions to woo recalcitrant shareholders.

Glencore, which already owns just over a third of Xstrata, confirmed its bid was now at 3.05 new shares for every Xstrata share held. This is up from 2.8 and in line with proposals made on Friday, following an unexpected turnaround that ended months of stalemate with the miner's second-largest investor, Qatar.

That level represents a 27 percent premium to the ratio at which Glencore and Xstrata were trading last week, when the market believed the deal would collapse.

"Glencore confirms that it is an all-share merger, and it will not increase the merger ratio further," the trading company said. "The increased merger ratio represents a substantial premium for a company with a 34 percent shareholder."

The offer released after a weekend of intense negotiations has been seen by those close to the deal as more conciliatory and less aggressive than proposals presented to Xstrata's board on Friday, just minutes before the miner's shareholders were due to vote on Glencore's original bid.

Glencore's chief executive and top shareholder Ivan Glasenberg still demands the top job in the combined entity, but the deal now retains a merger structure unless a change is approved by Xstrata - rather than shifting to a straightforward takeover requiring a simple majority to approve the bid.

It also provides for a balanced board, as in the original bid made in February, and makes the deal conditional on a retention scheme for the miner's senior managers - easing concerns about the operational risk of changes at the top.

Shares in Xstrata were up 2.4 percent at 1,038.5 pence at 0720 EDT, outperforming a 1.8 percent rise in the UK mining sector, while Glencore was down 1.2 percent. At those levels, the shares are trading around a higher ratio of 2.8, which would indicate the market is assigning a greater possibility that the deal will happen.   Continued...

Swiss commodities trader Glencore's logo is seen in front of its headquarters in Baar, near Zurich, February 6, 2012. REUTERS/Romina Amato