Glencore Raises Offer

LONDON: Trader Glencore has raised its offer for miner Xstrata in a dramatic 11th-hour

attempt to rescue one of the sector's largest ever deals from collapse after months of

opposition from rival shareholder Qatar.

Glencore chief executive Ivan Glasenberg lived up to his reputation as an unpredictable

dealmaker, with overnight talks with Qatar that unlocked an impasse between Xstrata's top

two investors. Dawn telephone calls yesterday put the now $36 billion deal back on the

table, sources familiar with the deal said.

Glencore, which has a 34 per cent stake in Xstrata already, is proposing an offer of 3.05

new shares for every Xstrata share it does not already own, up from 2.8. Qatar, Xstrata's

second largest shareholder, demanded a ratio of 3.25 in June, though in recent days sources

involved in the deal had said the Gulf state's sovereign wealth fund could settle for a


"Ivan showed what everyone suspected - he needs this deal more than anyone else," said one

source familiar with the deal.

The new proposal released by Xstrata, however, makes other changes, including placing

Glasenberg as chief executive of the new group instead of Xstrata's Mick Davis, a veteran

manager with a strong operating record who would have taken the helm under the original


The role for Davis and his team, if any, in the future company is unclear under Friday's

proposal, and the change could draw an end to the South African manager's career at Xstrata

after a decade at the top. Looking tense and tired at Xstrata's shareholder meeting, Davis

declined to comment on his plans.

Glencore also said it might change the offer's structure, from a complex arrangement that

requires 75pc approval of non-Glencore shareholders, to a straightforward takeover requiring

a simple majority of Xstrata shares.

But the proposals, still not a firm offer from Glencore, were far from certain yesterday to

pull the deal over the line. Xstrata directors registered their objections and several

sources said it was not clear Qatar backed either the management changes or the shift to a

simple takeover.

Xstrata cited a letter from its independent directors to Glencore which questioned the

revised offer's 22pc premium to Thursday's closing price as "significantly lower than would

be expected in a takeover" and criticised the intention to replace Davis and to change

incentives for executives to stay with the company as a "significant risk" to its


Sources close to the deal said Qatar supported the new share ratio but not necessarily the

move to a takeover structure or Davis' removal as chief executive. Qatar, which had not held

talks with Glencore for two months before Thursday night, has not yet commented on the


Glencore's bid had been heading for the rocks after Qatar, with 12pc of Xstrata, said it

would vote down the deal unless it was improved.
hazelyang hazelyang
Sep 10, 2012