Xstrata and Glencore Finally Make it (Almost) Official

by InvestorPlace Staff | October 1, 2012 10:29 am

Xstrata and Glencore Finally Make it (Almost) Official

After five years of discussion and negotiations[1], Swiss commodities companies Xstrata (PINK:XSRAF[2]) and Glencore (PINK:GLCNF[3]) are closer to officially tying the knot, as Xstrata’s board recommended its shareholders back a $33 billion offer from Glencore.

The deal marries Glencore’s core trading operations with Xstrata’s coal, copper and zinc mining operations, putting together a company with 130,000 employees located in around 40 countries.

However before the merger is complete, Xstrata shareholders must vote on both the bid offer and compensation issues. According to[4] BusinessWeek, shareholders will be asked to consider two resolutions: one to approve the takeover itself along with $232 million of retention bonuses to management, and a second that excludes the compensation package. The outcome of a third vote that deals solely with the compensation issue will determine which of the first two resolutions is accepted.

It’s Xstrata’s intention to raise mining output by 50 percent through 2014 to benefit from growing demand in Asia for coal and metals, however some investors do not believe that growth does not require retention payments, and indeed a major impediment to the deal is the vote of Qatar Holdings, which controls 12% of the stock.

Xstrada is the world’s largest exporter of thermal coal.

Written by InvestorPlace Staff

Endnotes:
  1. discussion and negotiations: http://investorplace.com/2012/09/glencore-boosts-share-offer-for-xstrata/
  2. XSRAF: http://studio-5.financialcontent.com/investplace/quote?Symbol=XSRAF
  3. GLCNF: http://studio-5.financialcontent.com/investplace/quote?Symbol=GLCNF
  4. According to: http://www.businessweek.com/news/2012-10-01/xstrata-recommends-glencore-bid-after-winning-assurance-on-board

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