Bloomberg News

Glencore-Xstrata Deal Terms Must Be ‘Revisited,’ Fidelity Says

February 12, 2012

Feb. 11 (Bloomberg) -- Fidelity Worldwide Investment said that while it supports Glencore International Plc’s 23.8 billion-pound ($37.5 billion) takeover bid for Xstrata Plc “in principle,” the terms of the deal “need to be revisited.”

The investment company, which commented yesterday in an e- mail, holds at least 1.5 percent of Zug, Switzerland-based Xstrata, according to data compiled by Bloomberg.

Fidelity is the latest investor to withhold support for the deal. Standard Life Plc and Schroders Plc, two of Xstrata’s largest shareholders, say they will oppose it unless Glencore boosts its friendly all-stock offer, which was announced Feb. 7. Glencore offered 2.8 shares for each one of Xstrata’s, representing a deal premium of about 8 percent.

Investors holding 16.48 percent of Xstrata can succeed in voting to block the deal. That’s because Glencore won’t be allowed to vote its 34 percent stake in Xstrata, according to the U.K.’s takeover code, putting the final decision into the hands of the shareholders who control the rest of the company.

Glencore, the world’s largest publicly traded commodity trader, plans to combine with Xstrata’s coal and copper mines to create a business with $209 billion in sales, the companies said Feb. 7. The takeover would be the biggest-ever mining deal if completed and form a commodities supplier to challenge BHP Billiton Ltd. and Rio Tinto Group.

Premium Comparison

Simon Buerk, a spokesman for Baar, Switzerland-based Glencore, declined to comment. Claire Divver, a spokeswoman at Xstrata, didn’t immediately respond to telephone calls and an e- mail sent outside normal business hours.

The 8 percent premium is calculated based on Glencore’s average price in the 20 days before the deal was first reported Feb. 2. That would be the second-lowest premium for any mining deal worth more than $5 billion, according to data compiled by Bloomberg.

The premium narrows to 7.2 percent when comparing the companies’ share prices in the 20 days prior to the official announcement on Feb. 7, data compiled by Bloomberg show.

Glencore dropped 1.7 percent to 435.2 pence at the close in London yesterday. Xstrata declined 0.7 percent to 1,198 pence.

--Editors: Simon Casey, Jasmina Kelemen

To contact the reporter on this story: Liezel Hill in Toronto at lhill30@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net


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