Glencore-Xstrata Deal on Hold for Another Week

Facing a deadline of Monday from the U.K.’s Takeover Panel, Xstrata plc was expected to announce today its decision on whether or not to accept the sweetened offer from commodities trading powerhouse Glencore International plc. Apparently the Xstrata board couldn’t agree — or got cold feet — and has been granted a one-week extension to make its decision. A decision is now due October 1st.

The issues remaining to be decided are not likely to be show-stoppers. Glencore raised its offer from 2.8 shares of Glencore for each share of Xstrata to 3.05 shares, but and made some other changes to original offer. Management control of the combined company will revert to Glencore after six months and Glencore will get to vote its 34% interest in Xstrata in the deciding shareholder vote. A retention package for Xstrata executives is also an issue. A simple majority is all that is required to clinch the deal for Glencore, where under the original offer the company was not allowed to vote its shares.

If Xstrata’s board does decide to accept the offer a new date will still need to be set to vote on the financial part of the deal and another date to vote on the retention package.

At today’s share prices the deal will create a company worth about $70 billion.

Paul Ausick