Glencore offers 8 percent premium to Xstrata to seal deal: FT

Mon Feb 6, 2012 12:52am EST
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(Reuters) - Commodities trader Glencore International (GLEN.L: Quote) is set to offer a bigger-than-expected premium to seal its proposed $88 billion merger with global miner Xstrata Plc XTA.L, the Financial Times reported on Monday.

Under the terms of the all-share deal, likely to be unveiled on Tuesday, Xstrata shareholders are set to receive 2.8 shares in Glencore for each share held, the newspaper said in an unsourced report.

The ratio -- which represents an 8 percent premium to Xstrata's share price before news of the merger talks surfaced -- was higher than had been expected by most analysts or investors, the paper said.

The deal terms could still change, it said. Each Xstrata share was valued at 2.66 times a Glencore share based on Friday's close.

"Given the volatility in the share prices since the deal was announced, I wouldn't have thought an 8 percent premium would matter much," said John Robinson, chairman of Global Mining Investments (GMI), a fund managed by BlackRock with shares in both Glencore and Xstrata.

"The key thing is the synergy that's generated. If they get the deal done, it's worth it," he said.

Xstrata shares have risen almost 11 percent since the close on Wednesday, before news of the deal was first reported.

Analysts at Credit Suisse estimate the synergies at around $468 million, roughly 5 percent of combined 2012 net income, thanks to a better use of Glencore's marketing capabilities.

Xstrata, in which Glencore already has a 34 percent stake, announced last week it had been approached by the world's largest diversified commodities trader and was in talks over an all-share "merger of equals," a deal that would be the largest in the sector since Rio Tinto's takeover of Alcan in 2007.   Continued...

<p>A worker uses a mobile lift to clean the windows of the headquarters of Swiss commodities trader Glencore in Baar near Zurich April 13, 2011. REUTERS/Arnd Wiegmann</p>