Glencore Hurries to Rescue $26 Billion Deal
Commentary – ProspectingJournal.com –
Commodities trader and mining company, Glencore International (LSE: GLEN) is now considering changes to its $26 billion takeover proposal for Xstrata (LSE: XTA) after shareholder revolt has put the deal in jeopardy. The deal, originally announced in February, has had its opponents from the beginning with some analysts and fund managers claiming that Glencore’s offer undervalued Xstrata, the largest exporter of thermal coal and forth-largest copper producer. However, major shareholder opposition hadn’t occurred until this week when Qatar Holding (who retains a 10% stake in Xstrata) withdrew its support.
Glencore, who already owns 34% of Xstrata, is offering an all share merger of 2.8 shares for every one of Xstrata and a contentious executive retention package to management, including a three-year, $45 million deal for CEO Mick Davis. The Qatari opposition comes only two weeks before the July 12th shareholder’s vote and signifies that a quarter of investors are opposed to the deal, enough to block it.
Qatar Holding is in favour of a merger between the two giants but is looking for better terms including 3.25 Glencore shares for each Xstrata. If the two companies merge they would have revenues in excess of $100 billion and become the 4th largest miner in the world.