After signs that the Glencore, Xstrata merger was heading for failure, Glencore announced earlier today that it had increased its offer for Xstrata to the equivalent of £23.2 billion pounds, by offering 3.05 shares instead of 2.8 for every Xstrata share. We trailed this expectation here earlier in the week (link –http://www.spreadbetmagazine.com/blog/2012/8/31/pressure-begins-to-mount-on-glencore-over-xstrata-merger.html)
The revised deal comes after significant pressure on Glencore from Qatar Holdings, which has built a significant share holding of around 12% over the last few weeks. A shareholder vote due to take place today was cancelled last night.
Glencore has also proposed that a simple majority of share holders is needed to pass the new deal. The original structure meant that just 16.5% of Xstrata’s shares would be needed to vote against the proposal.
In addition, Glencore Chief Executive Ivan Glasenberg will become CEO of the new group, instead of Xstrata’s Mick Davis.
So, Qatar holdings have accomplished what was said to be impossible a few weeks ago, with Glasenberg having to back track to pull the deal off. Share holder activism in action from the big guns from the Middle East. So Xstrata shareholders will be feeling much happier today than those in the Glencore camp and whether the combination ultimately bears fruit is anyone’s guess. But with commodity prices tumbling in 2012, it may not be the last merger or takeover in the sector by a long way with profits seriously under pressure.
Here’s what we posted on Monday – “We think an interesting arbitrage play is beginning to be presented here and which will conclude next Friday. I doubt that Glasenberg and Davis will let this deal slip and expect a late stage tweaking of the terms as we approach the deadline. With Xstrata currently up 3% at 927p the market is showing it’s expectations too. With Qatar Holdings publicly stating that they will buy upto 25% of Xstrata if the deal doesn’t go through then the downside in Xstrata is beginning to look limited. Any weakness early next week towards the late 800’s and a long trade has good odds of delivering a profit.”
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