Xstrata haggles over management as Glencore deadline nears

Fri Sep 28, 2012 2:08pm EDT
 
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By Sophie Sassard and Clara Ferreira-Marques

LONDON (Reuters) - Xstrata's XTA.L directors, facing a Monday deadline to deliver their verdict on Glencore's $32 billion bid, are hammering out a deal they hope will ensure the miner retains control of the combined group's board, even after the exit of its veteran boss.

All sides are working towards completing an agreement and announcing the board's recommendation by October 1, sources familiar with the deal said on Friday. However, the struggle to reconcile wide-ranging shareholder views, to ensure the success of the current, last-ditch attempt to merge, meant Xstrata's board could still ask for more time.

Glencore (GLEN.L: Quote), the world's largest diversified commodities trader, bid in February for the shares in Xstrata it did not already own, launching one of the resources sector's biggest ever takeover deals. But it was forced earlier this month to raise its price - offering 3.05 new shares for every share held, up from 2.8 - in an effort to rescue the tie-up after opposition from the miner's number two investor, Qatar.

As a condition of the change, however, Glencore imposed its own chief executive and largest single shareholder - Ivan Glasenberg - at the helm of the combined group, at the expense of Xstrata's mining veteran boss, South African Mick Davis.

As Glasenberg was already due to sit on the board, Davis's departure within six months of concluding the deal leaves an empty spot - and one that is key to the balance of the 11-strong board. Under the original deal, Xstrata would have six board seats including the chairman, while Glencore would have five.

Sources familiar with the matter said Xstrata was not necessarily seeking a specific name, but they said the miner wanted "assurances" that a satisfactory mechanism would be set up to allow it to retain the majority of seats. Without it the deal would be a takeover and arguably require a higher premium.

"I'd be staggered if this didn't happen now," one top-50 investor in Xstrata said. "There's been unexpected give on both sides - Qatar and Glencore."

Xstrata's board is widely expected to recommend Glencore's revised, higher offer, having backed the lower offer. But its independent directors - already under fire from some minority shareholders angry that the board supported a bid many of them opposed - want to ensure the miner holds on to the team at the helm of its operations which is also expected to deliver some 20 projects by 2014, including four major greenfield sites.   Continued...