GENEVA, SWITZERLAND – The board at mining giant Xstrata gave its approval Monday 1 October to a £21.9 billion takeover bid by commodities trader Glencore, and recommended that its shareholders approve the deal in November.
The merger of the two Zug-based firms would create a company with combined revenues of approximately $175 billion. It requires 75 percent acceptance by shareholders, who will also have to give a 50 percent approval of a controversial “pay to stay” retention bonus plan for Xstrata directors, for the deal to go through. The bonus plan was reduced from £173 million to £144 million.
Two large Xstrata investors, Knight Vinke Asset Management and Threadneedle Investments, said shortly after Xstrata’s board endorsed the bid that Xstrata was selling itself off ”on the cheap” and disapproved the directors’ “extraordinary executive payments”.
The bid by Glencore, originally launched in February 2012, was sweetened last month when Glencore increased its offer to 3.05 Glencore shares for each Xstrata share, up from 2.8 shares. The sweetener came after the Qatari sovereign wealth fund, Xstrata’s second biggest shareholder after Glencore, refused to approve the bid. Former British Prime Minister Tony Blair was called to help broker the new deal.
The revised deal sees Xstrata’s boss Mick Davis departing six months after the merger and Glencore’s chief executive and top shareholder, Ivan Glasenberg taking charge of the joint company. Xstrata says Davis waived his right to his 2012 retention payment, but will receive £9.6 million, the equivalent to his 2011 bonus and other benefits.
Glencore, founded by commodities trader Marc Rich in 1974, went public in 2011, with a $10 billion IPO (figure provided in dollars).