Commodities trader Glencore laid out its revised US$36 billion all-share bid for Xstrata yesterday, warning it would not improve the terms again as it outlined a fresh offer that made some concessions to recalcitrant shareholders.
Glencore, the miner’s largest shareholder, with a 34 percent stake, confirmed its offer was now 3.05 new shares for every Xstrata share held, up from 2.8. That represents a 27 percent premium to the ratio at which the two shares were trading last week, when the market believed the deal would collapse.
“Glencore confirms that it is an all-share merger, and it will not increase the merger ratio further,” Glencore said.
“The increased merger ratio represents a substantial premium for a company with a 34 percent shareholder,” it added, explicitly brushing off hopes from some shareholders of a bid from a third party.
In line with proposals outlined on Friday in a U-turn from Glencore that rescued the deal from collapse, the bid provides for Glencore’s own chief executive, Ivan Glasenberg, to take the helm of the combined group — at the expense of Xstrata’s Mick Davis, a mining veteran who would have taken the job under the original offer.
Glasenberg is expected to take the top seat after an interim period of six months under Davis, and, in a gesture to appease both the independent directors and shareholders fretting over management of Xstrata’s operations and new mines, Glencore said yesterday the merger remained conditional on Xstrata’s controversial retention scheme for key managers.
However, Glencore signalled it could make changes to the details of the scheme, seen by some investors as excessively generous.
“Glencore has asked the independent Xstrata board to consider what [if any] changes they would propose to the retention and incentive arrangement packages ... to ensure that they are acceptable to independent Xstrata shareholders,” it said.
Xstrata chairman John Bond will retain the same job in the combined group, as under the original proposals.
A former chairman of Vodafone and HSBC, Bond is considered a steadier hand than Glencore chairman Simon Murray, but has also been criticized by some minority shareholders for recommending the initial Glencore offer.
Xstrata said its independent directors would respond on Sept. 24 after consulting with major shareholders.
Glencore, the world’s largest diversified commodities trader, made a long-awaited takeover bid for Xstrata in February.
However, the offer ran into trouble and was expected to fail as shareholders prepared to vote last Friday, after No. 2 shareholder Qatar and other investors opposed the terms of the deal, while Glencore refused to yield.
Living up to Glasenberg’s reputation as an unpredictable negotiator, however, a higher proposal from Glencore was announced just minutes before the miner’s shareholders met to cast their ballots on the existing offer.