Glencore sweetens Xstrata bid as shareholder vote delayed – by Pav Jordan (Globe and Mail – September 7, 2012)

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Global commodities giant Glencore International PLC has sweetened its offer to acquire Swiss miner Xstrata PLC, bowing to pressure from a key shareholder who said the initial $34-billion was too low.

Xstrata, which is 34-per-cent owned by Glencore, said the new proposal envisaged an increase to the merger ratio to 3.05 Glencore shares for every Xstrata share, from a previous merger ratio of 2.8 shares.

“The board of Xstrata PLC has received a proposal from Glencore International PLC to amend the terms of the merger of Glencore and Xstrata,” Xstrata said in a statement.

Glencore’s offer to acquire Xstrata hit a road block in recent months after one of its top shareholders, Qatar Holdings, a global investment house founded by the Qatar Investment Authority, said the offer was too low.

A takeover of Xstrata is seen bolstering Glencore’s debt-laden balance sheet and providing the London-listed company with the ammunition it needs to grow and pursue acquisitions even as profits are squeezed in an environment of falling commodity prices.

The Baar, Switzerland-based company, which evolved from a small firm founded by one-time fugitive Marc Rich into a global power in commodities trading, has been pursuing an aggressive growth agenda since it went public in 2011 and wants to compete on an even footing with the likes of BHP Billiton Ltd., the world’s largest diversified miner, and its close rivals Rio Tinto PLC and Vale SA.

Earlier this year Glencore acquired Canada’s largest grain handler Viterra in a friendly, $6.1-billion deal.

Qatar, which has built its position in Xstrata from 3 per cent in February to about 12 per cent today, said in recent weeks it was seeking an exchange ratio of 3.25 new shares for each existing Xstrata share. Major shareholder Norges Bank Investment Management, a Norwegian sovereign fund, and other shareholders also called for a better deal.

Glencore said a shareholder meeting on the deal in Switzerland had been adjourned but did not comment on the new proposal, which came just as Xstrata shareholders gathered to vote on – and likely reject – the earlier offer.

“This looks like an old-fashioned gentleman’s agreement between mining barons. One side bid 2.8 and the other offered 3.25. In the end they split the difference almost exactly down the middle,” said Charles Gibson, head of mining at Edison Investment Research in London.

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