Glencore Offers to Pay More for Control of Xstrata

Literally minutes before shareholders of mining company Xstrata were set to vote on the offer from Glencore International, the vote was postponed and the commodities trading giant raised its offer for Xstrata from 2.8 Glencore shares for each Xstrata share to 3.05 Glencore shares. Qatar Holding, the Qatar sovereign wealth fund that had pressed Glencore to raise the offer to 3.25 shares, has reportedly agreed to the latest offer. The value of the merged companies has been placed at $70 billion.

In exchange for raising its offer, Glencore extracted some concessions. First, Glencore CEO Ivan Glasenberg will lead the combined companies. Under the original deal, Xstrata’s Mick Davis was named as the new CEO. Second, the deal will now be structured as a “scheme of arrangement,” the U.K. equivalent of a takeover. That means that only 50% of Xstrata’s shareholders must approve the new deal. Under the terms of the earlier offer, 75% of Xstrata’s shareholders — not including Glencore, which already owns 34% of the mining firm — had to approve the deal. News reports did not indicate whether Glencore would be allowed to vote its shares of Xstrata under the new agreement.

Xstrata is expected to postpone today’s scheduled vote on the deal to give the two companies’ managements time to finalize the details. Glencore’s shareholders postponed a scheduled vote on the original deal today as well, but there was no suspense there because Glencore’s management controls 83% of the company’s shares.

Glencore asked for a temporary suspension of trading in its shares today in London and Hong Kong.

Paul Ausick