Knight Vinke Rejects Glencore's Latest Xstrata Bid

LONDON--Activist fund Knight Vinke Sunday rejected commodities titan Glencore International PLC's (GLEN.LN, GLNCY) latest offer for Anglo-Swiss miner Xstrata PLC (XTA.LN) and called upon Xstrata's independent board of directors to seek the highest offer possible by inviting third-party offers.

"Glencore's latest proposal now makes clear that the transaction represents a change of control--for which, as we have continued to stress, an appropriate premium needs to be paid," said David Trenchard, vice-chairman of Knight Vinke, a top-30 shareholder in Xstrata.

Glencore on Friday raised its offer to 3.05 Glencore shares for every Xstrata share in a last-ditch effort to salvage the deal from the brink of collapse. Glencore had originally offered a share-swap ratio of 2.8 in February which garnered opposition from some of Xstrata's largest shareholders including Xstrata's second-largest shareholder Qatar Holding LLC, which said it would vote against the original deal.

Standard Life Investments (SLI.LN), which initially opposed the deal, said on Friday that it supported the new proposal while Qatar Holding, which could have blocked the deal on its own depending on the level of absenteeism at Friday's shareholder meeting, remained silent on the matter. Glencore made its latest offer public just before Xstrata's shareholders were due to vote on the merger of equals to create a mining juggernaut with a market capitalization of more than $70 billion.

Mr. Trenchard said that "the value of Xstrata is substantially more than Glencore is proposing today" given analysts' expectations that Xstrata's earnings will rise more than threefold over the next two years due to its organic growth pipeline.

He said that Xstrata's independent board of directors, which should not include any representatives of Glencore, should now review all options including the possibility of seeking third-party bids.

Analysts have said in the past that it would be hard to attract a third-party bid to the table given that Glencore owns a 34% stake in Xstrata and has shown in the past that it can use its stake to oppose Xstrata management's ability to negotiate deals. Glencore played a role in the failed talks between Brazilian iron-ore miner Vale SA (VALE) and Xstrata in 2008 when the two were contemplating a tie-up.

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