Xstrata PLC is set to recommend shareholders vote in favor of a ￡20.5 billion (US$33 billion) sweetened takeover offer by Glencore International PLC after revising the voting structure and winning assurances it will have a majority of the board.
Xstrata, the largest exporter of coal used by power stations, will make changes to secure the loyalty of top managers and balance investor demands, in order to create the world’s fourth-largest mining company, according to a person familiar with the deal, who asked not to be identified as the talks are private.
Glencore last month raised its offer to 3.05 of its shares for each one in Xstrata from 2.8, after investors said the original bid undervalued the Swiss mining company.
The Baar, Switzerland-based commodities trader invited Xstrata to propose changes to the bonus package to ensure shareholder backing for the year’s biggest takeover.
The retention payments total ￡144 million, excluding the ￡28.8 million bonus for Xstrata chief executive officer Mick Davis, who will not qualify to receive it, according to the person close to the deal.
Davis will receive a contractual termination fee of about US$13 million when he leaves, the person said.
The person would not elaborate on the changes to the offer before an official announcement, due today.
The revised bid stipulates that Davis lead the merged company before handing over to Glencore counterpart Ivan Glasenberg within six months. Spokesmen from Xstrata and Glencore declined to comment yesterday.
The sweetened bid followed a threat by Qatar’s sovereign wealth fund, Xstrata’s largest holder after Glencore, to block the deal in the absence of a higher offer.
Qatar Holding LLC said in June that a bid of 3.25 shares would be “more appropriate.”
As little as 16.5 percent of investors can prevent the merger because Glencore cannot vote with its 34 percent stake.
The combination of the two commodity companies, five years in the making, would couple Glencore’s global trading operations with Xstrata’s coal, copper and zinc mines.
A successful acquisition by Glencore at current share prices would be the second-largest in the mining industry, behind Rio Tinto Group’s US$38 billion purchase of Canada’s Alcan Inc in 2007.