Glencore’s Xstrata takeover is hanging in the balance

By MARTIN FLANAGAN
Published on 28/06/2012 00:25

COMMODITIES trader Glencore was last night fighting to save its cliffhanger $65 billion (£42bn) bid for mining giant Xstrata as it pushed back the timing of the deal.

The move came as major Xstrata shareholder, the Qatar Investment Authority (QIA), stunned the companies with a demand for better terms on Tuesday evening after remaining silent for months as the Qataris built up the second largest stake in the miner.

Richard Buxton, head of UK equities at Schroders, said: “Three cheers for the Qataris. We’ve said all along that the ratio was wrong so they’ve either now got to improve the terms or see this deal get voted down.”

Qatar Holdings has said it now wants 3.25 new Glencore shares for every Xstrata share, up from the 2.8 on the table.

The bid had also been controversial because of massively lucrative “golden handcuff” arrangements for many key Xstrata executives.

Glencore would have had to make any changes to the terms by this evening if its shareholders were to approve the takeover on 11 July as originally planned.

But Glencore issued a stock exchange statement last night saying it would now adjourn its shareholders’ meeting “to align it” with shareholder meetings to be convened by Xstrata.

The 11th-hour call from the QIA was expected to embolden other institutional investors angered by the hefty packages offered to retain top executives at Xstrata, including an extra £29 million over three years just to keep chief executive Mick Davis.

In an attempt to appease investors, Xstrata said yesterday the awards would now only fully vest if an additional $300m of savings were achieved in two years.

Glencore’s shares closed down 4.4p, or 1.5 per cent, at 298.3p. Xstrata ended up 10.8p, or 1.4 per cent, at 796.6p.