Xstrata’s board members have backed Glencore’s revised offer after gaining assurances over the combined company’s board and decoupling approval of incentive payments from a vote on the offer.
LONDON (BLOOMBERG) – Xstrata Plc (XTA)’s board recommended shareholders back a $33 billion sweetened takeover offer by Glencore International Plc (GLEN) after gaining assurances on board composition and delinking votes on the bid and bonus payments.
Shareholders will be asked to consider two resolutions: one to approve the takeover along with 144 million pounds ($232 million) of retention bonuses and a second that excludes the pay question, Xstrata said in a statement today. This means the deal can proceed even if the incentive payments are rejected.
The recommendation brings Glencore’s billionaire Chief Executive Officer Ivan Glasenberg one step closer to his goal of creating the world’s fourth-largest mining company. The combination, five years in the making, would couple Glencore’s global trading operations with Xstrata’s coal, copper, and zinc production, establishing a resources group with about 130,000 employees in more than 40 countries.
“It’s risky to split the vote, but it’s a calculated gamble,” Paul Gait, an analyst at Sanford C. Bernstein & Co. in London, said in e-mailed comments. “If the now separate measures pass, Glencore is free from the taint of railroading through a compensation package against shareholder wishes.”
The vote on approving the offer requires 75 percent approval, while the retention packages require 50 percent support in a separate vote. Zug, Switzerland-based Xstrata’s board unanimously recommended that shareholders vote in support of the resolution that requires approval of the retention package, the statement shows.
Board Seat
Glencore last month raised its offer to 3.05 of its shares for each in Xstrata from 2.8, after investors said the original bid undervalued the Swiss mining company. The Baar, Switzerland- based commodities trader invited Xstrata to propose changes to the bonus package to ensure shareholder backing for the year’s biggest takeover.
Xstrata, the largest exporter of thermal coal, delayed its response to Glencore’s revised proposal for a week to resolve issues over management and to determine who will take a seat on the combined board vacated by its CEO Mick Davis.
“A current Xstrata Group operational executive will replace Mick Davis upon his departure as an executive director of the board of the combined entity, to preserve the majority of Xstrata directors on the board,” Xstrata said today.
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