Bloomberg News

Xstrata, Glencore Holders Vote Sept. 7 on $26 Billion Deal

July 11, 2012

Glencore International Plc and Xstrata (XTA) Plc set Sept. 7 as the new date for shareholders to vote on their proposed combination, gaining time to win backing for a deal that would create the fourth-largest mining company.

Xstrata moved its vote, originally scheduled for tomorrow, to allow changes to documents of the so-called merger of equals after retention bonuses for executives were altered, the company said today in a statement. Glencore shareholders had initially been set to meet today to approve the deal, valued at about 17 billion pounds ($26.4 billion) at current prices.

At stake is the outcome of the largest takeover deal announced this year. Glencore, which in February offered 2.8 of its shares for each one in Xstrata, has had talks with Qatar Holding LLC after the sovereign wealth fund and second-largest investor in the Swiss coal producer called for a higher offer.

“This new date suggests a soft deadline for a possible agreement on terms with the Qataris of Aug. 24,” leaving time for a revised bid, Jason Fairclough, a Bank of America Corp. analyst, said in a note to clients. “Of course, terms could be changed after this and the date for the meeting pushed back.”

Xstrata will post revised documents to shareholders after Glencore completes its “supplementary prospectus,” according to the statement. The merger terms are otherwise unchanged and the two sides still expect the transaction to be completed by early in the fourth quarter, the company said.

European Commission

Xstrata and Glencore have won approval for the merger in Australia and “continue to engage in constructive discussions with the European Commission ahead of formal notification of the transaction,” according to the statement.

Reviews continue in China and South Africa, while the U.S. justice department has allowed the waiting period following notice of the deal to pass without any action, Xstrata said.

“A positive update is also provided on antitrust approvals,” Liberum Capital Ltd. said in a note. The “U.S. Department of Justice has allowed the waiting period to expire without raising any objections or seeking any remedies.”

Glencore, which said today it will publish a supplementary prospectus shortly, advanced 1.9 percent to 316.30 pence at the close in London. Xstrata rose 1.5 percent to 839 pence. The FTSE 350 Mining Index (F3MNG) declined 0.2 percent.

Xstrata Payments

Xstrata on June 27 responded to investor criticism of proposed payments to 73 of its most-senior executives for staying on at the company after the merger by tying the bonuses to cost-savings targets and making them all payable in shares.

Qatar Holding, which has built an 11 percent stake in Zug, Switzerland-based Xstrata, said June 26 Glencore should raise its offer 16 percent to 3.25 shares for each one in the target. Qatar is taking a “firm” position on the deal, Prime Minister Sheikh Hamad bin Jassim bin Jabr al-Thani said last week.

Xstrata shareholder Knight Vinke Asset Management LLC on July 3 joined Qatar in pushing for improved terms. Standard Life Plc and Schroders Plc also called for the offer to be sweetened, taking opponents of the terms to more than 14 percent.

A rejection of the bid by 16.48 percent of shareholders is enough to block it because U.K. takeover rules prevent Glencore using its 34 percent stake in Xstrata to vote on the deal.

Investors must also sign off on the retention payments. Xstrata’s board has recommended shareholders approve the offer.

Glencore, the largest publicly traded commodities supplier, is seeking to add Xstrata’s copper, coal and zinc operations to its businesses. The takeover is the largest announced deal so far this year, according to data compiled by Bloomberg.

To contact the reporter on this story: Firat Kayakiran in London at fkayakiran@bloomberg.net Jesse Riseborough in London at jriseborough@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net


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