Glencore, Xstrata agree on $33bn “merger’

[miningmx.com] – TERMS for a proposed $33bn merger of Xstrata with
minerals trading group and miner Glencore have been agreed by the companies – an
outcome widely anticipated as the two had made important concessions over the last
month.

Crucial changes to the combination of the companies include an increase to Glencore’s
offer for Xstrata and a restructuring of the offer allowing shareholders to approve the
merger without supporting controversial remuneration packages that are intended to
retain key Xstrata personnel.

Mick Davis, Xstrata CEO, will also be employed on his current remuneration and
emoluments rather than adoption of new, higher terms that drew sharp criticism.
Davis will be CEO of the combined company for six months, whereafter he will be
replaced by Ivan Glasenberg, CEO of Glencore.

Notwithstanding the imminent departure of Davis, who was the founding CEO of
Xstrata more than 10 years ago, the Board structure will contain a majority of Xstrata
directors. A current Xstrata operational executive will replace Davis on the Board as
an executive director.

In addition, Xstrata’s offer will remain a merger rather than a takeover requiring a
74% majority of Xstrata shareholders who can vote. Glencore owns just under 35% of
Xstrata.

The scheme of arrangement for the merger sees Glencore offering 3.05 Glencore
shares for every Xstrata share, a 17.6% premium over the earlier offer which was
rejected by the Qatari sovereign wealth fund, Xstrata’s 12% shareholder.

Further details of the proposed merger will be contained in a merger document that
Xstrata and Glencore said would be made available in October. The transaction, which
represents one of the largest mergers this year, is expected to be complete by year-
end.

“[W]e have decided to decouple the resolutions to approve the merger from the
resolution to approve the revised management incentive arrangements,’ said Xstrata
non-executive chairman Sir John Bond.

“This will, we believe, enable shareholders to vote in line with their convictions in
respect of retention arrangements, without influencing their voting intention on the
new scheme,’ he added.

“Importantly, shareholders who would only support the merger if key Xstrata
personnel can be retained are able to approve the new scheme only if retention
arrangements are approved by shareholders,’ he said.

Commenting on his future role if the merger is approved by shareholders, Davis said:
“My objective during my time as CEO of the combined group will be to preserve and
enhance the value Xstrata’s management team has created over the past 10 years
through a well-planned integration process and to lay down the foundations for the
combined group’s success over many decades to come.’