Glencore raises offer for Xstrata to salvage deal

Trader Glencore has raised its offer for miner Xstrata in a dramatic 11th-hour effort to rescue one of the sector’s largest ever deals from collapse after opposition from rival shareholder Qatar.

Glencore’s chief executive Ivan Glasenberg, helped by a late intervention from former British Prime Minister Tony Blair, lived up to his reputation as an unpredictable dealmaker, with overnight talks with Qatar and dawn telephone calls yesterday that put the now $36 billion deal back on the table, sources familiar with the deal said.

Glencore, which has a 34 per cent stake in Xstrata already, is proposing an offer of 3.05 new shares for every Xstrata share it does not already own, up from 2.8, a statement issued by Xstrata said. Qatar demanded a ratio of 3.25 in June, but in recent days sources involved in the deal had said the Gulf state’s sovereign wealth fund could settle for a compromise.

The new proposal, however, would place Glasenberg as chief executive of the combined group instead of Xstrata boss Mick Davis, who would have taken the role under the original deal.

Davis’s role, if any, in the future company is unclear, and the change could signal an end to the South African-born manager’s career at Xstrata after a transformational decade at the helm. Looking tense and tired at Xstrata’s shareholder meeting, Davis declined to comment on his plans.

A statement issued by Xstrata also said Glencore could consider changing the offer’s structure, from a complex arrangement that requires 75 per cent approval without Glencore, to a straightforward takeover requiring a simple majority.

“We’ve always thought that there was a reasonably good chance that Glencore would bump the offer modestly, and we believe that Qatar will probably accept this 3.05,” said Brewin Dolphin analyst Nik Stanojevic.

A source familiar with the deal said there were “constructive talks” ongoing, and Qatar was supportive of the offer. Qatar, which had not held talks with Glencore for two months before Thursday night, has not yet commented on the deal.

The revised offer pleased top-10 shareholder Standard Life and found wary support among other of Xstrata’s institutional shareholders.

“We are supportive of the improved terms and the changes to the executive governance arrangements,” said David Cumming, head of equities at Standard Life Investments.

“The deal will, we believe, enhance the growth prospects of the combined group and consequently, as shareholders both of Xstrata and Glencore, we are pleased with the proposed outcome.”

Glencore’s bid had been heading for the rocks after Xstrata’s second-largest shareholder, Qatar, with 12 per cent, said it would vote down the deal unless it was improved.

Industry sources and those involved in the bid had not ruled out a last-minute handbrake turn from Glencore, but Glencore’s chairman Simon Murray shocked shareholders gathered in Zug, Switzerland, for a vote on the deal, by hurriedly cancelling the general meeting, citing “overnight developments”.

Murray, alone, then rushed out of a back door. Less than two hours later, Xstrata postponed its own meeting and announced the revised terms.

Under the deal’s original structure, holders of just 16.5 per cent of Xstrata shares would have needed to vote against the tie-up for the deal to collapse, and Qatar said last week it would vote against, making it very unlikely the bid could have gone through without an improvement.

Glencore yesterday, however, left the door open for a change to that structure to a straight­forward takeover.