Glencore-Xstrata deal meets shareholder opposition

Tue Feb 7, 2012 12:44pm EST
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By Sarah Young and Eric Onstad

LONDON (Reuters) - At least two top 10 shareholders in miner Xstrata plan to vote against a takeover by commodities trader Glencore, threatening the creation of a powerhouse spanning mining, agriculture and trading.

Standard Life Investments and Schroders said on Tuesday the deal, the mining sector's biggest, to buy the remaining 66 percent of Xstrata for $41 billion, undervalued their shares.

The deal, designed to create a company to rival mining heavyweights such as BHP Billiton and Rio Tinto, needs to be approved by 75 percent of shareholders excluding Glencore, which is barred from voting.

Standard Life, the fourth largest investor in Xstrata, and Schroders together own 3.6 percent of Xstrata, but 5.6 percent of the shares needed for approval, according to Thomson Reuters data. Their stand may persuade others to follow suit.

"I'm in complete agreement with Standard Life and we intend to do exactly the same. This is a fabulous deal for Glencore, it's probably a great deal for the Xstrata management, but it's a poor deal for Xstrata's majority shareholders," Schroders' Richard Buxton told Reuters.

Broker Liberum Capital said in a note: "Only 16 percent of Xstrata's register have to vote against the deal to block it, which means there is a significant risk Glencore's proposal isn't passed,"

Xstrata Chief Executive Mick Davis, who will be CEO of the enlarged company, admitted the two companies would have to work hard to bring some of his shareholders on board.

"We clearly have to now go to our shareholders and speak to them and take them through the transaction ... we've got a long gestation period, we recognize that," he told analysts.   Continued...

<p>The Glencore logo is seen on a sign in front of Swiss commodities trader Glencore building in Baar near Zurich January 5, 2010. REUTERS/Christian Hartmann/Files</p>