Glencore, Xstrata Merger Gets MOFCOM OK; Mick Davis to Step Down Early

LONDON--Swiss commodities broker Glencore International PLC (GLEN.LN) said Tuesday the Ministry of Commerce of the People's Republic of China, or MOFCOM, has cleared its merger with Xstrata PLC (XTA.LN) subject to certain conditions, adding that Mick Davis has agreed not to take up the six month role of Chief Executive Officer and Executive Director of Glencore Xstrata PLC following completion of the merger.

MAIN FACTS:

-Mr. Davis will step down from Xstrata PLC upon completion of the merger, allowing Glencore CEO Ivan Glasenberg to assume the role of Chief Executive Officer of the combined Group from the effective date - expected May 2.

-Conditional on the merger becoming effective, Mr. Davis will receive a sum equal to the pay, bonus, benefits and pension allowance he would have been entitled to receive for the six month period (being 4.63 million pounds) as a result of such termination.

-Mr. Davis has agreed to act as a consultant to the Combined Group until June 30 to assist with an orderly handover.

-As disclosed in the Glencore/Xstrata public documents, Mr. Davis's existing employment with the Xstrata Group will terminate on the effective date of the merger following which he will additionally receive a sum equal to 100% of his annual salary, 2011 bonus and other benefits and pension allowance in accordance with the terms of his existing contract with the Xstrata Group.

-Glencore shall sell its post-merger ownership interest in Las Bambas, a copper project currently being developed by Xstrata in Peru to a purchaser approved by MOFCOM before Sept. 30, 2014 for not less than the pre-determined price with completion to occur by June 30, 2015.

-Pre-determined price shall be the higher of:

* the fair market price of Glencore's ownership interest in Las Bambas as evaluated according to industry practice by two independent investment banks chosen by Glencore and confirmed by the monitoring trustee and;

* the total of all of the costs actually incurred by both Glencore and Xstrata in Las Bambas, as audited and confirmed by the monitoring trustee.

-Glencore will start the sale process and announce its offer to sell its ownership interest in Las Bambas within three months of MOFCOM's announcement Tuesday.

-If Glencore fails to enter into a binding sale and purchase agreement by Sept. 30, 2014 or fails to complete the transfer of its ownership interest in Las Bambas by June 30, 2015 then, Glencore must appoint a divestiture trustee to sell by way of auction its ownership interest in one of Tampakan, Frieda River, El Pachon or Alumbrera, as designated by MOFCOM, at no minimum price within three months from Oct. 1, 2014 or July 1, 2015, as the case may be.

-For a period of eight years from Jan. 1, 2013, Glencore will continue to offer to supply Chinese customers with a minimum volume of copper concentrate annually under long-term contracts, with such minimum volume being equal to the average volume of copper concentrate supplied to Chinese customers under long-term contracts by both Glencore and Xstrata in 2011 and 2012 namely 900,000 dry metric tons.

-Price for a minimum of 200,000 dry metric tons of copper concentrate will be offered in accordance with the applicable annual benchmark price agreed between major miners and major smelters during annual supply negotiations and the price for the remaining 700,000 dry metric tons of copper concentrate will be offered with reference to the applicable annual benchmark price.

-For a period of eight years from Jan. 1, 2013, Glencore will continue to offer to supply Chinese customers with zinc concentrate and lead concentrate through long-term contracts and spot contracts, the offered terms of which, including those in relation to price, will be fair and reasonable and in accordance with prevailing international market terms after taking into account product quality, volume, delivery period, payment terms, buyer creditworthiness and any other relevant circumstances.

-Glencore shares at 1105 GMT up 12 pence, or 3.6%, at 333 pence valuing the company at GBP22.8 billion; Xstrata shares up 43 pence, or 4.47%, at 1010 pence, valuing the company at GBP29.02 billion.

-Write to Ian Walker at [e-mail]

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