Tension for Xstrata board as Glencore deal nears finish line – by Clara Ferreira-Marques (Reuters – November 18, 2012)


(Reuters) – Commodities trader Glencore (GLEN.L) is set to all but clinch its $30 billion takeover of Xstrata this week, despite a potential snub for the miner’s board if, as expected, investors scrap a controversial pay plan for its managers.

Shareholders in both Glencore and Xstrata (XTA.L), the world’s fourth-largest diversified miner, will vote in Switzerland on Tuesday.

European competition regulators will decide by Thursday whether to give the green light to one of the sector’s biggest ever acquisitions, or begin a longer probe.

After nine months of unexpected twists and wrangling between Xstrata and its top shareholders – not to mention years of on-off talks between the miner and trader – the deal is moving towards the finish line, a victory for Glencore’s boss, top shareholder and the deal’s chief cheerleader, Ivan Glasenberg.

The deal’s prospects were boosted last week thanks to support offered by Xstrata’s second-largest investor, Qatar, overcoming initial reticence over the terms of the deal. Glencore, Xstrata’s top shareholder, has separately offered up antitrust concessions, in the hope of securing an EU nod.

“There are hurdles, but they are not insurmountable. I would be very surprised if the deal didn’t go through,” analyst Chris La Femina at Jefferies said.

Shares in the two groups closed on Friday at a ratio of 2.95 – narrowing in on the ratio of 3.05 shares for every Xstrata share held being offered by Glencore in the all-share deal.

However, a decision by Qatar to abstain from voting on Xstrata’s 140 million pound ($222 million) “golden handcuffs” plan to tie in key management has increased the chances that the proposal – which has ruffled investor feathers – will fail.

Qatar said retaining Xstrata’s operational management was of “critical importance” – agreeing with the miner’s board, which has emphasized the group’s shift to a strategy led by organic growth.

But the Gulf state decided to abstain, given “the sensitivities concerning governance issues in the UK.”

Its decision – a surprise to those who had expected Qatar to stand by its support of Xstrata managers – follows public comments by top institutional investors like Standard Life, which has already said it will vote down the pay plan, blasting a “rapacious management team and a weak board”.

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