Glencore, Xstrata tie-up approved

Published Nov 21, 2012

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Jesse Riseborough, Firat Kayakiran and Leigh Baldwin London

Glencore International’s $31 billion (R274bn) takeover of Xstrata was approved by investors, leaving clearance by regulators in Europe and China as the remaining hurdles for this year’s biggest deal.

Xstrata shareholders voted yesterday in favour of Glencore’s all-stock offer, while rejecting retention bonuses for about 70 Xstrata managers, the mining company said in a series of regulatory filings. Xstrata chairman John Bond said he would resign once the merger was completed, given shareholders failed to back the board’s recommendations.

The votes remove an obstacle to Glencore chief executive Ivan Glasenberg’s plan to create the world’s fourth-largest mining company by adding Xstrata’s coal, nickel, zinc and copper operations to his cotton-to-crude-oil commodities-trading empire. While the European Commission was due to rule on the deal within the next two days, this was not a major stumbling block, Liberum Capital analysts said.

“We would be very surprised at this point if this merger is not a done deal,” Christopher LaFemina, an analyst at Jefferies Group, said. “Kudos to Ivan Glasenberg and Glencore for navigating this entire merger process so well.”

Investors in Glencore, which already owns 34 percent of Xstrata, voted 99.4 percent in favour of the deal.

Glencore sweetened its offer in September to 3.05 shares for each one in Xstrata from 2.8 to win support from Qatar Holding, the nation’s sovereign wealth fund and holder of a 12 percent stake in the world’s largest exporter of power station coal. That gained Qatar Holding’s support for both resolutions to approve the deal. The fund abstained from a third vote on the bonuses.

Xstrata advanced 2.3 percent to £9.79 (R137.64) at 3.35pm in London trading. Glencore rose 0.8 percent to £329.05.

The combined group represents about 2.1 percent of the UK’s benchmark FTSE 100 index, ranking it 13th in the gauge, according to Liberum.

Xstrata shares advanced to record 2.98 times higher than those of Glencore.

Xstrata shareholders voted 67.9 percent in favour of a first resolution, which included the incentive package, falling short of the required 75 percent, the mining company said.

A second poll in favour of the deal without incentives was agreed by 78.9 percent of shareholder votes. Shareholders voted 78.4 percent against the retention bonuses.

“This is a great deal for shareholders,” said Thomas Mitsoulis, an Xstrata shareholder who voted for both resolutions to approve the deal with and without the retention package.

“It doesn’t matter what the price is, it’s about the synergies. It’s like a marriage… you have to think in the long term: It’s not just about the couple, it’s about the children.”

Glencore Xstrata International, the new name for the company, will have interests in about 35 coal mines in Colombia, Africa and Australia, and account for about 10 percent of seaborne exports of the fuel.

China’s Ministry of Commerce might approve the transaction in early 2013 and the European regulator would likely focus on the combined company’s influence in the zinc market, SBG Securities’ Peter Davey said. – Bloomberg

Glasenberg plays winning hand in Xstrata deal, page 18

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