Xstrata Recommends Glencore Bid After Winning Assurance on Board

Oct. 1 (Bloomberg) --
"Xstrata Plc’s board recommended shareholders vote in favor of a $33 billion sweetened takeover offer by Glencore International Plc after gaining assurances over the combined company’s board and decoupling approval of incentive payments from a vote on the offer.


“We have decided to decouple the resolutions to approve the merger from the resolution to approve the revised management incentive arrangements,” Xstrata Chairman John Bond said in a statement today. This will “enable shareholders to vote in line with their convictions” without influencing their voting on the Glencore combination, he said.

Glencore last month raised its offer to 3.05 of its shares for each in Xstrata from 2.8, after investors said the original bid undervalued the Swiss mining company. The Baar, Switzerland- based commodities trader invited Xstrata to propose changes to the bonus package to ensure shareholder backing for the year’s biggest takeover.

Xstrata, the largest exporter of thermal coal, delayed its response to Glencore’s revised proposal for a week to resolve issues over management and to determine who will take a seat on the combined board vacated by its Chief Executive Officer Mick Davis.

Sweetened Bid

The sweetened bid followed a threat by Qatar’s sovereign wealth fund, Xstrata’s largest holder after Glencore, to block the deal in the absence of a higher offer. Qatar Holding LLC said in June that a bid of 3.25 shares would be “more appropriate.” As little as 16.5 percent of investors can prevent the merger because Glencore can’t vote its 34 percent stake.

The combination of the two commodity giants, five years in the making, would couple Glencore’s global trading operations with Xstrata’s coal, copper, and zinc mines, creating the fourth-largest mining company.

A successful acquisition would be the second-largest in the mining industry, behind Rio Tinto Group’s $38 billion purchase of Canada’s Alcan Inc. in 2007. Global mining deals swelled to $98 billion last year, the highest volume since 2007 according to data compiled by Bloomberg, as commodity demand in developing nations and the deteriorating quality of mineral reserves pushed producers to seek greater economies of scale.

To contact the reporter on this story: Firat Kayakiran in London at fkayakiran@bloomberg.net "




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