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.
Sources familiar with the deal said that Mr Ivan Glasenberg CEO of Glencore 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 USD 36 billion deal back on the table.
Glencore, which has 34% 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 compromise. Mr Ivan showed what everyone suspected he needs this deal more than anyone else.
The new proposal released by Xstrata however makes other changes including placing Glasenberg as chief executive of the new group instead of Xstrata's Mr Mick Davis a veteran manager with a strong operating record who would have taken the helm under the original deal.
Glencore also said that it might change the offer's structure from a complex arrangement that requires 75% 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 criticized the intention to replace Davis and to change incentives for executives to stay with the company as a 'significant risk' to its operations.
Sources close to the deal said that Qatar supported the new share ratio but not necessarily the move to a takeover structure or Davis' removal as chief executive.
Source - Reuters
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