Glencore bid talks focus on premium
MINING group Xstrata could lose out on its merger with commodities giant Glencore if the two companies ignore Xstrata shareholders’ demands to be offered a decent premium, investors warned last night.
The deal, revealed last week, could see a combined company worth £50bn with revenues of over £110bn.
Xstrata chief executive Mick Davis is tipped to run the merged companies – at least for an initial period – but some Xstrata shareholders would rather see him step down altogether.
Richard Buxton, head of UK Equities at Schroders, said he will ballot against the merger – and vote Davis off the board – if Xstrata shareholders are not given an attractive premium.
He told City A.M., “Glencore needs Xstrata – it has a higher growth rate and better assets. If they want to get command of that, they should pay a control premium.”
Buxton called the the 11-12 per cent per cent speculated premium “derisory” and “unimpressive”.
However, it emerged last night that Glencore’s advisers might be contemplating a premium as low as eight per cent.
A source close to the deal pointed out that there has been an 11 per cent uplift for Xstrata shareholders since the deal was announced.
The details of the transaction are expected to be revealed on Tuesday when Xstrata publishes its preliminary year-end results.
Under the terms of the merger, Glencore – which owns 34 per cent of Xstrata – will be excluded from voting on its shareholding.
Glencore and XStrata both declined to comment.
It is seen likely that the former BP chief executive Tony Hayward would become the senior non executive director of the merged group.