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Glencore International Plc (GLEN) and Xstrata Plc (XTA)’s boards met separately yesterday as a deadline loomed for Glencore’s 21.9 billion-pound ($35.5 billion) takeover bid, people familiar with the matter said.
Xstrata, based in Zug, Switzerland, is due to respond to Glencore’s revised all-share proposal, the largest this year, by 7 a.m. on Sept. 24. The people who confirmed the meetings asked not to be identified before a formal announcement.
Glencore, seeking to create the world’s fourth-biggest mining company, was forced to boost its offer for Xstrata after investors said they would vote against the initial bid. It increased its offer on Sept. 7, even as the commodities outlook dimmed with demand growth in China expected to wane further.
Xstrata, the world’s biggest thermal coal shipper, has discussed with its investors whether provisions intended to retain managers with intimate knowledge of its mines and other assets are sufficient or should be altered, according to a person with knowledge of the talks.
Xstrata rose 0.8 percent to 1,057 pence at 9:13 a.m. in London while Glencore advanced 1.2 percent to 372.5 pence. The board meetings were first reported by the Financial Times, which said Xstrata may make an announcement today
Glencore on Sept. 7 raised its all-share offer to 3.05 shares for each of Xstrata’s from 2.8 shares following opposition from investors including Qatar Holding LLC who said they would vote against the original bid.
Xstrata stock traded at 2.84 times that of Baar, Switzerland-based Glencore. That’s down from 2.85 yesterday, the highest since talks between the companies were announced Feb. 2.
As part of the revised offer, Glencore Chief Executive Officer Ivan Glasenberg plans to lead the combined group within six months of its completion, scrapping the original proposal that Xstrata CEO Mick Davis would hold the position for about three years.
Xstrata shareholders Standard Life Plc (SL/) and Fidelity Worldwide Investment objected to $278 million of retention payments originally proposed for Xstrata executives as part of the takeover.
Glencore said Sept. 10 it asked Xstrata’s board to consider if there are any changes it wishes to propose to the payments, which include 28.8 million pounds in shares of the combined group to Davis over three years. Glencore said that day it’s “content” with Xstrata’s request that its senior management and employees get retention and incentive payments.
The combination of the two commodity companies would couple Glencore’s global minerals, agriculture and energy trading operations and mining assets with Xstrata’s coal, copper and zinc mines.
Since the February announcement of Glencore’s offer, commodity prices and sentiment about prospects for resources have turned negative after growth in China, the biggest metals consumer, cooled to the slowest pace in three years and the European debt crisis dragged on global growth expectations.
“The boom in commodity prices is over -- no one can deny it,” Australia’s Resource Minister Martin Ferguson, presiding over the biggest exporting nation of iron ore, coal and alumina, said last month. BHP Billiton Ltd. (BHP), the world’s biggest mining company, echoed Ferguson’s comments on Sept. 19 saying it didn’t expect record commodity prices to be sustained as the mining industry had boosted supply and the pace of China’s economic expansion had slowed.
A successful acquisition would be the second-largest in the mining industry, behind Rio Tinto Group’s $38 billion purchase of Canada’s Alcan Inc. in 2007. Global mining deals swelled to $98 billion last year, the highest volume since 2007, according to data compiled by Bloomberg, as commodity demand in developing nations and the deteriorating quality of mineral reserves pushed producers to seek greater economies of scale.
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