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Directors of both Glencore (LSE:GLEN) and Xstrata (LSE:XTA) have finally reached the final terms for the much anticipated mega-merger of the year, leaving the last say to Xstrata’s shareholders whether to approve or reject the making of another global commodity and mining powerhouse, official statements released today from both companies read.
The marriage of the two complementary businesses have been repeatedly stalled since it was announced last February owing to opposition from Xstrata’s major shareholders led by sovereign wealth fund Qatar Holding, which asked for 3.25 Glencore shares for every Xstrata share the fund holds, along with every other shareholder, instead of the 2.8 the original offer presented.
Independent Directors of Xstrata have agreed to the 3.05 Glencore shares being offered for every one of Xstrata’s, revealed on 7th September and confirmed three days after by Glencore, which said that the latest offer was the highest bid it can make.
What Has Changed?
Xstrata’s current Chief Executive, Mick Davies, however, will only lead the combined group for six months starting from inception and will be replaced by Ivan Glasenberg, Glencore’s current Chief Executive, thereafter – a revision following the change in the ratio of the all-share merger.
In the statement, however, Xstrata said it will make sure there will always be a majority of directors from Xstrata in the new entity’s board and its key managers will retain their posts or the deal is off.
“The Independent Xstrata Non-Executive Directors continue to believe the proposed exchange ratio, governance structure and the retention of key Xstrata managers through the Revised Management Incentive Arrangements are essential elements of the Merger,” the statement today read.
Sir John Bond, Chairman of the Board of Xstrata, however, noted that there are shareholders who are opposed to the retention payments of key manager, thus the company resolved to split the resolutions to be presented to the board so as to make the incentive packages a non-requisite for the approval of the merger.
All Hands on Deck
Indirectly, Sir Bond hinted that Qatar Holding has agreed to the terms as the Chairman stated the Board “consulted” with their major shareholders regarding the now final terms.
Back on 11th September, QH stated it will take into consideration Xstrata’s board’s view on the new deal presented by Glencore, saying it will make known its position in due course.
No official statement has been communicated by the investment fund but given Sir Bond’s statement, it is understood the 12% owner of Xstrata, a crucial vote in the conclusion of the deal, is in concurrence with the Board.
The merger, now valued at £55 million, is expected to be completed by the end of 2012.
Company Spotlight
Xstrata shares were up 3.2% to 988 pence by 10:30 AM GMT, while Glencore stocks recovered from the red earlier to a small gain of 0.7% to 345.60 pence, giving the ratio of 2.8 shares to one of Glencore’s and Xstrata’s, respectively.
Shares of Xstrata have dropped 20% since the merger deal was announced eight months ago, while Glencore’s lost 25% of its value from since then.
