10 Sep 2012

Glencore bid for Xstrata ‘is final’

Glencore confirms it has raised its offer for Swiss mining company Xstrata by 9 per cent, boosting investor hopes that the $36bn all-share offer will go ahead.

Glencore’s bid, thought to be its final offer, has an 80 per cent chance of success, analysts predicted.

Glencore Chief Executive Officer Ivan Glasenberg made the revised offer after investors shunned his original bid to create the world’s fourth largest mining company. The increase means Glencore is now offering 3.05 of its shares for each Xstrata share.

Glencore is already the world’s largest publicly-traded commodities supplier, and the revised offer would result in the departure of Xstrata CEO Mick Davis, 54, within six months. Glencore said in a statement today. Ivan Glasenberg would become chief executive after Mr Davis’s departure.

Davis out

Their is speculation up to 20 senior Xstrata executives may also leave if the deal goes ahead.

“The intention to replace Mick Davis as CEO and to amend the management incentive arrangements carries the risk of seeing key management depart,” Alain William, a Paris-based analyst at Societe Generale SA, said in a note today. “This is not a done deal.”

Xstrata’s board may decide to reject the bid, which is structured as a “scheme of arrangement” rather than a takeover. Glencore can only switch to a takeover offer with the consent of Xtrata and regulatory authorities.

“The new proposal is structured far less aggressively than the straight takeover hinted at on Friday,” Liberum analysts wrote today. “We expect the revised structuring should get Xstrata board’s recommendation.”

Qatar wildcard

The new proposal is better than the previous offer, Jane Coffey, head of equities at Royal London Asset Management, told Bloomberg today, adding that “Glasenberg becoming CEO “is fine by me”.

Qatar Holding LLC and Knight Vinke Asset Management said they would vote against the previous bid.

Qatar Holding owns 12 per cent of Xstrata and is the biggest obstacle to Glencore’s plans.

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