Glencore eyes end in marathon Xstrata deal

CLARA FERREIRA-MARQUES
Last updated 16:52 20/11/2012

Relevant offers

World

Sue Finley, 80, was hired by Nasa in 1958 as a 'computer' Woman gets $8030 but fails in bid to sue Australian supermarket after slipping on a grape Kayak is letting travellers search for travel deals using emojis Uber CEO Travis Kalanick resigns under investor pressure George Clooney sells his tequila to Diageo for US$1 billion London fire: Luxury apartments acquired for displaced Grenfell tenants Aussie bankers drug colleague with valium and laxatives in attempt to discredit him Passengers set to pay as Uber introduces tipping and fees for keeping drivers waiting Bauer's Australia boss quits, replaced by New Zealand CEO, after Rebel Wilson defamation case Apple gives the iPad some love to halt its long slide

Shareholders in miner Xstrata are expected to give the green light on Tuesday to a long-awaited US$31-billion ($38 billion) takeover by commodities giant Glencore, paving the way for one of the largest tie-ups in the sector to date.

After nine months of tense negotiations, late-night talks and last-minute twists, the deal to create a mining and trading powerhouse is within Glencore's grasp - a personal victory for its biggest shareholder, key dealmaker and chief executive, Ivan Glasenberg, who will also lead the combined group.

The deal has been dragged back from the brink of collapse on more than one occasion since it was first proposed in February - most recently in September, when Glencore was forced to improve its offer to woo Xstrata's second-largest shareholder, Qatar.

Qatar said last week it would support the offer, increasing the chances the tie-up could be all but certain before the end of this week. That is, if a positive outcome at Tuesday's Swiss shareholder meetings is followed by approval from Europe's antitrust regulators, due to give their verdict by Thursday.

Though an unusually complex voting structure means a positive outcome on Tuesday is not guaranteed, analysts say the key question mark will be over a separate vote on a "golden handcuffs" retention plan for Xstrata managers; championed by the board, it is deeply unpopular with Xstrata shareholders.

"I think they'll get the deal done. I don't see a reason why not, as Qatar has said 'yes'," said analyst Nik Stanojevic at stockbroker Brewin Dolphin. But he added there was "certainly a chance" the retention plan would not get shareholder approval.

RISKS

A strong vote against the £140-million plan would be an embarrassing blow for Xstrata's board, its outgoing chief executive, mining veteran Mick Davis, and for its chairman, John Bond, formerly of Vodafone and HSBC.

Bond argued the company needed the plan to ensure key managers stay on after the tie-up, as Xstrata is shifting to a period of organic growth - with large, complex projects in the pipeline - after a decade of acquisitions. Xstrata started with the US$2.5b purchase of Glencore coal assets.

But the "golden handcuffs" have been lambasted by investors and risked sinking the tie-up, until a voting structure that had made the whole deal conditional on the pay plan was revised.

Qatar said last week it would abstain on the issue of retention pay, increasing the chances that that vote will not pass. Glencore will also not vote its shares.

Ad Feedback

Glencore, Xstrata's largest shareholder with a 34-per cent stake, is offering 3.05 new shares for every Xstrata share to make good finally on its hopes of forging a mining and trading combine that can give it greater clout in global markets. The shares closed on Monday at prices implying a ratio of 2.92.

When Tuesday is over, however, shareholders and Glencore itself could be focusing on the task ahead, including potential non-core asset sales, an overhaul of Xstrata's project pipeline and even potential future deals. Glencore, Stanojevic said, is one of few "unashamed buyers" at a time of frugal spending.

- (Live Matches)

Special offers

Featured Promotions

Sponsored Content