Glencore insists $37bn bid for Xstrata is fair

Tue, Mar 6, 2012, 00:00

COMMODITIES TRADER Glencore yesterday brushed aside requests from Xstrata investors to improve an agreed $37 billion bid for the miner, saying its existing offer was fair to all shareholders and emphasising its own growth prospects.

Glencore’s tie-up with Xstrata, in which it already owns a 34 per cent stake, would be the largest deal in the mining sector since Rio Tinto’s acquisition of Alcan in 2007, but has faced opposition from some key Xstrata shareholders who say the terms do not recognise the company’s potential.

“This is a merger of equals. Xstrata have got most of the senior jobs. Most previous mergers of equals were done at a ratio of equals – this deal . . . has been done at a premium,” Glencore chief executive Ivan Glasenberg, who will become deputy chief executive in the combined group, said. “We believe it is a fair deal, fair to all shareholders.”

Glencore was addressing investors yesterday for the first time since the long-awaited Xstrata offer was announced in February, and ahead of a campaign of roadshows which will give Glasenberg and other executives the chance to sell the deal.

An ebullient Glasenberg dismissed concerns voiced by Xstrata shareholders, not least over the quality of Glencore’s mining asset base which, he says, has delivered return on equity above rivals, and over the combined entity’s management structure, which some see as leaving room for potentially damaging clashes.

Mr Glasenberg, the single largest Glencore shareholder, will report to fellow South African Mick Davis, whom he picked to run Xstrata 11 years ago and with whom he has a close but sometimes tense relationship.

Mr Glasenberg said there would be similar benefits further down the chain and again dismissed worries over an exit of Glencore’s star traders, whom he said would instead be keen to take advantage of increased opportunities within a larger group, even after lock-up clauses dating from its IPO expire in May. The world’s largest diversified commodities trader is offering 2.8 new shares per Xstrata share it does not already own. The offer is currently worth just under 1,154 pence per share, compared to an Xstrata share price of around 1,164 pence. – (Reuters)