Glencore-Xstrata looks like a done deal

Now that Qatar's sovereign wealth fund indicated that it will throw its weight behind the merger, a tie-up between Swiss neighbours Xstrata plc (LON:XTA) and Glencore International (LON:GLEN) appears hard to stop.

With 12% of the diversified miner Qatar is Xstrata's largest shareholder – apart from Glencore which already owns 34% but as a related party is not allowed to vote – and has been acting as kingmaker in negotiations.

Shareholders of both Xstrata and Glencore will vote on the $66 billion merger of the two commodities giants in Zug, Switzerland on November 20.

When the deal was announced in February Glencore was offering 2.8 shares for every one of Xstrata, but in September Glencore CEO and largest shareholder with more than 15%, Ivan Glasenberg, relented under pressure from Qatar and other major shareholders and upped the offer roughly 9% to 3.05.

As part of the revised offer which would be the largest corporate deal of the year, Glasenberg, would lead the combined company and not current Xstrata CEO Mick Davis, who was earlier slated to lead a post-merger 'Glenstrata'.

According to the latest merger documentation Qatar would own 8.4% of Glenstrata based on the current terms while Glasenberg's stake in the combined entity would be just under 8.3%.

Glasenberg's role and $4 billion stake in a Glenstrata have not been the most contentious issues before shareholders – that would be the more than generous $220 million set aside for 'retention bonuses' for Xstrata's top management.

On that score Qatar is less forthcoming saying that concerning the 'Revised Management Incentive Arrangement' it will abstain given "sensitivities concerning governance issues".

FT.com points out that this "raises the possibility that the deal could go through without the retention package in place – an embarrassing result for Xstrata’s board, led by Sir John Bond, which had argued that without the retention bonuses the “value proposition” of the combined company would be at risk."

Should a deal be made – and regulators fearing a Glenstrata will have too much power in coal and other metals could still block the transaction – it will the largest ever for the mining sector and shake-up the industry in the same way the BHP and Billiton tie-up did a decade ago.

Glencore was founded in 1974 by Marc Rich, a fugitive businessman controversially pardoned by Bill Clinton shortly before leaving office in 2001. The firm with just short of 60,000 employees in 33 countries went public in a $37 billion listing in May last year.

Glencore's IPO also made billionaires of Spaniard Daniel Mate ($2.8 billion) and Greek citizen Aristotelis Mistakidis ($2.8 billion). The two, number 40 and 41 of mining's richest, started at Glencore in the early 1990s in the company's zinc, copper and lead trading department. Alex Beard, director of Glencore's oil business raked in $2.1 billion during the IPO.

Glencore which trades everything from cotton to copper to crude oil to has not only been good to its employees – US investor William Macaulay last year made $1 billion by purchasing convertible bonds in Glencore and Bulat Utemuratov (#71) who sold zinc and gold mining co's to the Swiss firm is once again a billionaire thanks to the IPO.

Xstrata traces its roots back to 1926 with infrastructure investment firm Südelektra. Davis joined in 2001 and a year later listed the company on the LSE , when it simultaneously bought $2.5 billion of Glencore's coal assets.

Xstrata is the world’s biggest exporter of thermal coal and the fourth-largest copper producer and in the decade under Davis has gone from having a fewer than 2,500 employees to a workforce exceeding 70,000 in 20 countries.

A combined Xstrata and Glencore would have revenues in excess of $140 billion with as much as 80% of sales earned from mining.

Even before building up Xstrata through a series of billion dollar transactions, Davis was a formidable dealmaker who with fellow South African Brian Gilbertson created Billiton. Davis left for Xstrata after Billiton was sold to BHP in 2001.

Glasenberg and Davis both cut their teeth in their native South Africa’s coal industry in the 1980s.

Glencore in bid for Anglo's stake in Brazilian iron-ore unit

Glencore is one of the bidders for Anglo American's majority stake in the Amapa iron-ore operation in northern Brazil.

Other bidders in the second phase of the sale process include Russian steel producer Severstal, privately owned mining group Zamin, and Australia’s Centaurus.

The project has been deemed noncore and has been on the block since last year by Anglo American.

A sale of the 70% stake in Amapa would be good news for Anglo, whose CE resigned recently. Cynthia Carroll quit due to investor pressure about, among other factors, delays and cost overruns at the Minas Rio operation. Selling Amapa would allow Anglo’s Brazilian team to focus on Minas Rio, which is central to recover ing the miner’s underperforming shares.

An internal valuation last year put Amapa’s value at $1.5b n, but that value is expected to have dropped significantly as the iron-ore price has weakened.

Gamesmanship in Xstrata-Glencore Merger Vote

By STEVEN M. DAVIDOFF

If nothing else, the executives at Xstrata, the Swiss mining giant, get marks for being clever.

On Thursday, the company set Nov. 20 as the date for a shareholder vote on its merger with trading behemoth Glencore. The vote has been structured in a way to maximize efficiency in the hope that $200 million in management retention payments are also approved. It’s just part of the machinations intended to influence the voting on the largest deal of the year.

Xstrata shareholders initially objected to the low premium being offered by Glencore, which also owns 34 percent of Xstrata. On Sept. 7, Glencore, about to lose an Xstrata shareholder vote on the deal, raised the ratio it was willing to pay to 3.05 Glencore shares per Xstrata share from 2.8 Glencore shares. That valued the combined company at about $90 billion.

Some shareholders, led by Knight Vinke Asset Management and Threadneedle Investments, are still objecting. In a letter to The Financial Times on Sept. 14, Knight Vinke’s head, Eric Knight, wrote that “we have been disappointed at the lack of robust independence exhibited by the board in the context of Glencore’s hostile takeover bid.” For the understated English, words like “disappointed” are practically extreme rhetoric.

But Xstrata’s board is not only coming under fire for selling to Glencore on the cheap. It is also being criticized for initially planning to pay large retention bonuses in the amount of $275 million to management.

In the newest iteration, Xstrata has reduced the aggregate by $75 million, primarily because Xstrata’s chief executive, Mick Davis, will no longer head the combined group. Still, pay is a touchy topic in Britain these days and shareholders like the American asset manager BlackRock reportedly remain dissatisfied that the payment is not only too big, but misdirected. Xstrata has stated it needs to pay this amount to retain its mining experts, but about 15 of the intended 72 recipients are central administration professionals, according to reports.

It is here where the voting games begin.

The initial deal required that the merger and retention package be approved together. But in a clever move bound to have its shareholders’ heads spinning, Xstrata claims it has decoupled the two issues by separating the vote.

The first question is a vote to approve or disapprove the retention pay package. The second, however, is in two parts. Shareholders are being asked to vote to:

Part I: Approve the merger and accept the compensation package.
Part II: Approve the merger and reject the compensation package

Shareholders can vote yes or no on the first question and also yes or no for both parts of the second question. Critically, Xstrata is letting shareholders vote yes to both parts of Question 2.

This is important because if the first question (whether to approve the compensation package) is approved, then any votes made to approve the merger and reject the compensation package are disregarded and only votes to approve the merger and accept the compensation package are counted. If the first question is not approved, then any votes made to approve the merger and accept the compensation package are disregarded and only votes to approve the merger and reject the compensation package are counted.

According to Xstrata, “this voting structure provides eligible Xstrata shareholders with the ability to vote against the resolution to approve the revised management incentive arrangements in the knowledge that a vote against the revised management incentive arrangements is not necessarily a vote against the merger.”

Really?

The problem is that if you want the merger to go through but don’t want the incentive package, you are faced with a quandary. If the retention package is approved and you vote no on the merger and retention package, your vote won’t count toward the 75 percent of shares needed to approve the merger.

The result may be that a merger you want does not happen because the necessary vote cannot be achieved.

This is a diabolical game of the prisoner’s dilemma. As Institutional Shareholder Services wrote in a note to its clients this week, the only viable strategy if you want the merger to succeed is to vote yes for both parts of Question 2. Otherwise, you could be left with no merger and no compensation package. But such a vote almost ensures the passage of the retention package with the merger.

Xstrata claims that it has decoupled the vote on the merger from the compensation decision, but when you really look at it, the company appears to have just rejiggered it to push shareholders into accepting the package.

It may backfire on the company, however, if shareholders really do find the payments so objectionable they vote against their economic interests to have the merger approved. This is yet another test of attitudes on compensation in Britain.

Even without this gamesmanship, Xstrata faces an uphill battle. To win, Xstrata must have the deal approved by 75 percent of the shares not held by Glencore.

This effectively means that holders of 16.5 percent of Xstrata’s shares can block the deal, which creates an opening for more maneuvering. And here, the government of Qatar, which holds 12 percent of Xstrata’s shares, becomes the real player. It will determine whether this deal goes through.

Those in favor of the deal cheered when Prime Minister Sheikh Hamad bin Jassim bin Jabr al-Thani of Qatar, stated cryptically that “we’re looking in favor of doing something between the two companies,” taking this for a sign of support. But still there is no express statement, and Qatar had previously said it would back an offer at a ratio of 3.25 Glencore shares.

The real question is whether Xstrata can be sold to anyone else and if so, whether Glencore is underpaying. Xstrata is important to Glencore for its cash flow but other huge mining conglomerates may also be interested. Vale, the Brazilian mining company, reportedly had discussions to buy Xstrata in 2008. Whether Vale would be willing to bid again is unknown, as is whether there is anyone out there who can compete to buy Xstrata or whether it is more valuable for Xstrata to stay independent. But with Glencore’s bid, which is the only deal on the table that Xstrata seems to be willing to pursue, these are questions left unanswered.

Instead, as this deal heads to another vote, it is stuck in the land of voting gamesmanship.

Xstrata board backs Glencore's $33bn takeover offer

Xstrata's board members have backed Glencore's revised offer after gaining assurances over the combined company's board and decoupling approval of incentive payments from a vote on the offer.

Xstrata Plc (XTA)'s board recommended shareholders back a $33 billion sweetened takeover offer by Glencore International Plc (GLEN) after gaining assurances on board composition and delinking votes on the bid and bonus payments.

Shareholders will be asked to consider two resolutions: one to approve the takeover along with 144 million pounds ($232 million) of retention bonuses and a second that excludes the pay question, Xstrata said in a statement today. This means the deal can proceed even if the incentive payments are rejected.

The recommendation brings Glencore's billionaire Chief Executive Officer Ivan Glasenberg one step closer to his goal of creating the world's fourth-largest mining company. The combination, five years in the making, would couple Glencore's global trading operations with Xstrata's coal, copper, and zinc production, establishing a resources group with about 130,000 employees in more than 40 countries.

"It's risky to split the vote, but it's a calculated gamble," Paul Gait, an analyst at Sanford C. Bernstein & Co. in London, said in e-mailed comments. "If the now separate measures pass, Glencore is free from the taint of railroading through a compensation package against shareholder wishes."

The vote on approving the offer requires 75 percent approval, while the retention packages require 50 percent support in a separate vote. Zug, Switzerland-based Xstrata's board unanimously recommended that shareholders vote in support of the resolution that requires approval of the retention package, the statement shows.

Board Seat

Glencore last month raised its offer to 3.05 of its shares for each in Xstrata from 2.8, after investors said the original bid undervalued the Swiss mining company. The Baar, Switzerland- based commodities trader invited Xstrata to propose changes to the bonus package to ensure shareholder backing for the year's biggest takeover.

Xstrata, the largest exporter of thermal coal, delayed its response to Glencore's revised proposal for a week to resolve issues over management and to determine who will take a seat on the combined board vacated by its CEO Mick Davis.

"A current Xstrata Group operational executive will replace Mick Davis upon his departure as an executive director of the board of the combined entity, to preserve the majority of Xstrata directors on the board," Xstrata said today.

Davis, who will be the CEO of the combined group for six months before handing over his post to Glasenberg, won't receive any retention bonus, according to the statement. Davis will receive his contractual termination fee, which is about $13 million according to Xstrata's annual report.

European Commission

New documents on the deal should be sent to shareholders this month and dates announced for new meetings to vote on the transaction, the statement shows. Glencore is expected to notify the European Commission of the deal shortly and it is anticipated that the regulatory approvals needed for the transaction will be secured by Dec. 31.

Glencore's increased bid followed a threat by Qatar's sovereign wealth fund, Xstrata's largest holder after Glencore, to block the deal in the absence of a higher offer. Qatar Holding LLC said in June that a bid of 3.25 shares would be "more appropriate." As little as 16.5 percent of investors can prevent the merger because Glencore can't vote its 34 percent stake.

The revised offer reflects 17.6 percent premium over the ratio of 2.59 implied by undisturbed closing share prices on Feb. 1, Xstrata said today. The companies on Feb. 2 confirmed that they were in talks for the transaction. Xstrata shares advanced 1.5 percent to 971.7 pence at 8:05 a.m. in London, while Glencore slid 0.5 percent to 341.25 pence.

Shareholder Convictions

A successful acquisition would be the second-largest in the mining industry, behind Rio Tinto Group's $38 billion purchase of Canada's Alcan Inc. in 2007. Global mining deals swelled to $98 billion last year, the highest volume since 2007 according to data compiled by Bloomberg, as commodity demand in developing nations and the deteriorating quality of mineral reserves pushed producers to seek greater economies of scale.

"We have decided to decouple the resolutions to approve the merger from the resolution to approve the revised management incentive arrangements," Xstrata Chairman John Bond said in today's statement. This will "enable shareholders to vote in line with their convictions" without influencing their approval of the Glencore combination, he said.

Source: Bloomberg

Xstrata haggles over management as Glencore deadline nears

Xstrata's directors, facing a Monday deadline to deliver their verdict on Glencore's $32-billion bid, are hammering out a deal they hope will ensure the miner retains control of the combined group's board, even after the exit of its veteran boss.

All sides are working towards completing an agreement and announcing the board's recommendation by October 1, sources familiar with the deal said on Friday. However, the struggle to reconcile wide-ranging shareholder views, to ensure the success of the current, last-ditch attempt to merge, meant Xstrata's board could still ask for more time.

Glencore, the world's largest diversified commodities trader, bid in February for the shares in Xstrata it did not already own, launching one of the resources sector's biggest ever takeover deals. But it was forced earlier this month to raise its price - offering 3.05 new shares for every share held, up from 2.8 - in an effort to rescue the tie-up after opposition from the miner's number two investor, Qatar.

As a condition of the change, however, Glencore imposed its own chief executive and largest single shareholder - Ivan Glasenberg - at the helm of the combined group, at the expense of Xstrata's mining veteran boss, South African Mick Davis.

As Glasenberg was already due to sit on the board, Davis's departure within six months of concluding the deal leaves an empty spot - and one that is key to the balance of the 11-strong board. Under the original deal, Xstrata would have six board seats including the chairman, while Glencore would have five.

Sources familiar with the matter said Xstrata was not necessarily seeking a specific name, but they said the miner wanted "assurances" that a satisfactory mechanism would be set up to allow it to retain the majority of seats. Without it the deal would be a takeover and arguably require a higher premium.

"I'd be staggered if this didn't happen now," one top-50 investor in Xstrata said. "There's been unexpected give on both sides - Qatar and Glencore."

Xstrata's board is widely expected to recommend Glencore's revised, higher offer, having backed the lower offer. But its independent directors - already under fire from some minority shareholders angry that the board supported a bid many of them opposed - want to ensure the miner holds on to the team at the helm of its operations which is also expected to deliver some 20 projects by 2014, including four major greenfield sites.

The board had hoped to link a retention package for Xstrata's top employees to a vote on the deal itself thereby keeping the team responsible for its major industrial assets and the bulk of its profits.

But several top shareholders have objected, with some warning they would vote down any such package they consider excessive - and the merger in the event of a combined vote.

SPLITTING THE VOTE?

With just days to go, sources familiar with the deal said the directors could ultimately agree to separate shareholders' vote on the bid from the vote on the more emotive issue of pay.

That would allow Xstrata's board to keep the retention package it is reluctant to change - more than £140-million ($226.7-million) over two years, excluding the outgoing Davis - but allow some shareholders to vote against it without imperilling the deal.

"There is a lot to balance. It is not as simple as (funds and key owners) Blackrock and L&G against the other shareholders - there are wide-ranging views," one of the sources said.

Among other funds, both BlackRock and L&G, which together own 6.5% of Xstrata shares, have signalled they do not support elements of the deal.

Qatar, which is not expected to make a public statement until Xstrata lays out its board's position, is said by some sources to support the retention payment and the new terms, but its ultimate position is still uncertain, leading to what several sources said was a "tense atmosphere" on all sides.

Qatar, with just over 12% thanks to regular share buying, has proven an unlikely kingmaker in the deal.

Hedge funds have also found themselves in the spotlight - their support could be critical, in a deal where shareholders representing just 16.5% of total shares could block the deal. These funds represent 10% of Xstrata at the moment, just enough to outweigh vocal rebels including Knight Vinke, Schroders and others.

The Xstrata board's decision, if ultimately positive, will pave the way for Glencore to file its long-awaited antitrust notification with the European Union, setting the regulatory clock ticking in Brussels, the sources said.

Glencore had been expected to file that notification by the end of September, after months of negotiations with officials to avoid a lengthy, in-depth probe.

Source: Reuters

Xstrata gets extra week to decide on Glencore bid

Britain's takeover regulator has given the miner another week to consider the $36bn offer from Glencore, prompting concerns about whether or not another twist remains in the tale

Britain's takeover regulator has given mining group Xstrata Plc an extra week to decide whether to accept the $36 billion revised offer from Glencore , prompting jitters over what is the latest twist in a seven-month saga.

The unexpected extension - granted at the request of both firms - surprised the market, which had been expecting Xstrata to announce its decision by Monday at the latest.

Analysts attributed the delay to talks around management incentive schemes and the nomination of Glencore's chief executive for the top job at the merged entity, rather than Xstrata's, which was proposed by Glencore in what it called its final offer, made earlier in September.

Shares in Xstrata closed down 4.2 percent in London while Glencore fell 1.7 percent.

"The extension was requested to enable Xstrata's independent non-executive directors to take full account of feedback from consultation with key Xstrata shareholders," Xstrata said in a brief statement.

It now has until Oct. 1 to say whether or not it will recommend Glencore's offer to shareholders, having first backed a lower offer in February.

Glencore, already Xstrata's biggest shareholder, raised its offer to 3.05 shares for every Xstrata share held from a previous offer of 2.8 shares, in a last-ditch attempt to rescue the deal after Xstrata's second-biggest investor Qatar Holding demanded improved terms in June.

The new proposal differs from the original one, not only in value but also in the fact that Glencore's chief executive, Ivan Glasenberg, is to take over the helm of the combined business from Xstrata chief Mick Davis within six months.

Davis would have stayed for at least three years under the original deal.

BOARD APPROVAL

Some shareholders and analysts said that while the delay to Xstrata's decision was negative for the share price and raised uncertainty, they still expected Xstrata to back the deal.

"We still think Xstrata's board will give its approval on or before Oct. 1," said Anne-Sophie D'Andlau, co-founder of Paris-based hedge fund firm CIAM who, like a number of hedge funds, has profited from a long Xstrata, short Glencore position.

The management changes and issues around the retention of key Xstrata staff were likely to be on the investor feedback list with which Xstrata was grappling, said some analysts.

"What points of substance were not raised at the 2.8 exchange ratio that are now being raised when it was supposedly all buttoned up at 2.8? Clearly it all comes back to the role of Mick Davis," Bernstein analyst Paul Gait said.

Davis has held the top job at Xstrata for a decade, building it up from a $500 million collection of zinc and ferrochrome assets into the world's fourth-largest diversified miner.

Qatar owns more than 12 percent in Xstrata, giving it a key position in a deal structure which allows just 16.5 percent of Xstrata shareholders to block any bid.

Investors have been broadly supportive of the revised offer, though Qatar has yet to make its view public.

Qatar declined to comment on the granting of the extension after saying earlier this month it was considering its position and would take into account the views of Xstrata's board.

Glencore has invited Xstrata to suggest changes to the retention and incentive packages for the miner's staff to help ensure the arrangements are acceptable to independent Xstrata shareholders.

The hefty pay packages offered to retain over 70 of Xstrata's top managers in the original deal plan had irked investors, and in June Xstrata took steps to try to appease shareholders by proposing that awards would be paid entirely in shares and would only fully vest if an additional $300 million of cost savings were achieved in two years.

Some investors see the incentive packages as important to the merged entity's future success, believing in the need to retain top Xstrata managers who will be in charge of new mining projects which are set to boost the company's volumes by 50 percent by 2014. (Additional reporting by Kate Holton and Laurence Fletcher; Editing by Andrew Heavens and David Holmes)

Source: Reuters

Xstrata granted extra week to decide on Glencore bid

Britain's takeover regulator has given global miner Xstrata an extra week to decide whether to accept the $36-billion revised offer from Glencore, in the latest twist in the long-running saga.

The unexpected extension - granted at the request of both firms - briefly unnerved investors in the two groups, who had been expecting Xstrata to announce its decision by Monday at the latest.

Shares in Xstrata and Glencore initially slipped 3.2% and 2.3% respectively on the news before recovering slightly.

Xstrata was down 2.3% at 15:21 GMT and Glencore stock was down 1%.

"The extension was requested to enable Xstrata's independent non-executive directors to take full account of feedback from consultation with key Xstrata shareholders," Xstrata said in a brief statement.

It now has until October 1 to say whether or not it will recommend Glencore's offer to shareholders. Analysts said they still expected the deal to go ahead.

Glencore, Xstrata's biggest shareholder, raised its offer for the company earlier in September to rescue the deal after Xstrata's second-biggest investor Qatar Holding demanded improved terms in June.

Qatar owns more than 12% in Xstrata giving it a key position in a deal structure which allows just 16.5% of Xstrata shareholders to block any bid.

Investors have been broadly supportive of the revised offer, though Qatar has yet to make its view public. Earlier this month it said it was considering its position.

Edited by: Creamer Media Reporter

Glencore expected to make offer for Alcoa's Italy plant

Alberto Pili, a councillor for the Carbonia-Iglesias province where the Alcoa plant is located, expects Glencore to submit a letter of intent for the troubled plant in the next 10-15 days.

Swiss commodities trader Glencore is expected to present a letter of intent for the troubled Sardinian plant of U.S. aluminum maker Alcoa in the next 10-15 days, a Sardinian government official told Reuters on Wednesday.

"The government has provided a guarantee, requested by Glencore, to keep the power price at 35 euros (per megawatt hour) over 15 years," Alberto Pili, a councillor for the Carbonia-Iglesias province where the Alcoa plant is located.

"Glencore has committed to present a letter of intent to Alcoa within 10-15 days," he added.

Alcoa has decided to close down its Sardinian smelter, a move that puts at risks the jobs of 500 direct employees.

Earlier on Wednesday the government met with Glencore and regional representatives to discuss energy costs at the plant, one of the main reasons it has found it difficult to compete.

Sardinia President Ugo Cappellacci also said he was hopeful in an offer by Glencore within 10 days as he came out of the Rome meeting.

At the beginning of September the government wrote to Glencore to reassure it on power discounts for 15 years if it decided to buy the plant.

"If a solution can be found that benefits all parties, than Glencore would look to help," a source close to the company said.

A price of 35 euros per megawatt hour would be significantly below the approximately 70 euros per megawatt hour power would cost without subsidies but there are concerns it could be construed as state aid.

The EU Commission has previously asked Italy to recoup aid from favourable power tariff schemes.

Source: Reuters

Xstrata board expected to back Glencore bid next week

Xstrata's board is expected to recommend Glencore's revised $34-billion bid as early as next week, sources close to the deal say, although it may come with some qualification surrounding such issues as staff retention.

Glencore, already Xstrata's biggest shareholder with a 34% stake, made its original recommended all-share offer in February but hit trouble in June when the company's second-biggest investor Qatar Holding demanded an improved deal.

Detailing the new offer on Monday, Glencore said Xstrata shareholders would now get 3.05 shares for every Xstrata share held, instead of the previous offer of 2.8 shares. However, under the new proposal its own CE, Ivan Glasenberg, is to take over the helm of the combined business from Xstrata's chief executive Mick Davis, who would have stayed for at least three years under the original deal.

Instead, Davis, who has led Xstrata for over a decade, will leave within six months.

"We all agree that 3.05 is better, and that if you were happy with 2.8, you should be happy with 3.05," one source involved in the deal said.

"But it is all work in progress. There are a lot of people saying this is a slam dunk, but the board has a duty ... to ensure they are comfortable they have the right construct (and can) retain key operational personnel."

It was not clear what changes the Xstrata board could request or demand, but one of the sources said the board could seek guarantees from Glencore for managers it sees as key: "It will take more than just reassurance."

A separate source said any changes were likely to come in Xstrata's controversial retention package for more than 70 key executives, though others said that was not likely to change.

Operational and management issues are key for Xstrata and at the forefront of concerns for the board, several of the sources said, as the miner shifts from an acquisition-fuelled first decade into a phase of organic growth which the miner hopes will boost volumes by 50% by the end of 2014 and cut costs.

Xstrata's board has until September 24 to decide whether or not to recommend the revised offer. Hostile bids are unusual in mining, a sector in which many large deals and mega-mergers have failed to materialise for a variety of reasons including political and regulatory issues and a tie-up between Xstrata and Glencore would be the second-biggest deal in the sector to date.

MEETINGS CONTINUE

Several sources said the board - set to meet this week and next as talks continue between independent directors and shareholders - had not yet taken a final decision on details including changes to the staff retention package, for example, but could reach an agreement before the deadline of September 24.

"Meetings are still going on. The board will have a range of views to consider," another source familiar with the deal said.

Shareholders have been broadly supportive of the revised offer, though Qatar, which has backed Xstrata's management, has yet to make its decision public. It said earlier this week it was considering its position.

Most of the sources said they now expected a deal could be done, however. "We are now far more optimistic than last week. It looks like if there is no deal agreed on Monday, then it will be (a few days later)," one of them said.

Xstrata's independent directors are unlikely to rush their approval, having come under fire after recommending the original Glencore deal and the more than £170-million ($274-million) retention package for 73 of the miner's top managers which many shareholders felt was excessive.

After Glencore's last-minute revision of its offer last week the directors said in a curt statement that the exchange ratio was "significantly lower than would be expected in a takeover" and warned of "significant risk" if Davis were to be replaced as chief executive and management incentive arrangements altered.

In detailing its revised offer on Monday Glencore took a more conciliatory tone than when it first made the proposal on Friday, saying the retention and incentive arrangements would have to be acceptable to shareholders.

Edited by: Creamer Media Reporter

Qatar keeps Glencore guessing on Xstrata bid

Qatar, Xstrata's second-largest investor, has held back immediate support for Glencore's raised bid for the miner, despite an apparent rapprochement last week, saying in a rare statement on Tuesday it was still considering its position.

The tiny, gas-rich Gulf state has become an unexpected kingmaker in commodity trader Glencore's now $36-billion bid for Xstrata, the world's fourth largest diversified miner, and its efforts to create a mining and trading powerhouse.

Through aggressive buying in the market since the proposed takeover was announced in February, Qatar's sovereign wealth fund has built up a stake of more than 12% in Xstrata - a key position in a deal structure that allows just 16.5% of Xstrata shareholders to block any bid.

"Qatar Holding wishes to make clear that it has made no decision yet as to whether or not it would accept the revised proposal," it said in a brief statement, its first since Glencore's revised final bid was released on Monday.

"QH will make its decision in due course after giving careful consideration to the implications of the proposed management changes, the other elements of the revised proposal and the views of Xstrata's board."

Qatar's surprise announcement in June that it would not support the initial offer from Glencore, which owns 34% of Xstrata, eventually forced the commodities trader to back down at the last minute last week and raise its all-share bid, though not to the ratio initially demanded by the Gulf state.

Until Tuesday, Qatar had been silent on the revised offer.

Sources familiar with the matter have said Qatar, irked by the assumption that it would automatically back any higher Glencore offer, feels little pressure to decide on its position immediately and could even wait beyond a statement from Xstrata's board, due by September 24, and hold out until closer to a vote, which could be in over a month's time.

Other institutional shareholders, in the process of being consulted by Xstrata's board as it considers its recommendation, indicated on Monday they thought the deal could get done, though not all were pleased with changes, including plans to make Glencore's Ivan Glasenberg chief executive of the combined group instead of Xstrata's Mick Davis.

Glencore confirmed on Monday that it was raising its bid to 3.05 new shares for every Xstrata share held, up from 2.8, which Qatar had said was not enough.

Qatar had said in June that it saw the appropriate ratio as 3.25, but in recent days had indicated it could yield a little.

The revised offer represents a 27% premium to the ratio at which Glencore and Xstrata were trading last week, when the market believed the deal would collapse.

It was released after a weekend of intense negotiations and has been seen by those close to the deal as more conciliatory and less aggressive than proposals presented to Xstrata's board on Friday, just minutes before the miner's shareholders were due to vote on Glencore's original bid.

Edited by: Reuters

All-share $36 Billion Xstrata bid now final - Glencore

As part of the revised deal, Xstrata CEO, Mick Davis will be replaced by Ivan Glasenberg as CEO of the enlarged company after 6 months

Glencore International Plc, which raised its bid for Xstrata Plc in an effort to win approval for the $36 billion takeover, said the sweetened offer for the Swiss mining company is final.

"The increased merger ratio represents a substantial premium for a company with a 34 percent shareholder," Glencore, the largest publicly traded commodities supplier, said in a regulatory filing. Today's statement confirmed the Baar, Switzerland-based company's Sept. 7 proposal of 3.05 shares, up from a February bid of 2.8 shares, for each one in Xstrata.

Glencore proposed that its Chief Executive Officer Ivan Glasenberg replace Xstrata CEO Mick Davis as head of the combined company. Davis will be CEO for six months before handing over to Glasenberg, Glencore said today.

Glencore unexpectedly called off a shareholder meeting on Sept. 7 to vote on the all-stock offer. Xstrata released a statement the same day saying it had received a proposal from Glencore with a 17.6 percent premium that was "significantly lower than would be expected in a takeover."

Davis is ready to step down, provided shareholders get the right price, a person familiar with the situation said of Xstrata, which is based in Zug, just two miles from Glencore's headquarters in Baar.

The proposal for Glencore's Glasenberg to be CEO of the combined group "represents significant risk" for retention of Xstrata's management team and goes against the merger of equals agreement made in February, Xstrata said Sept. 7.

Xstrata Discount to Glencore Bid Shows Increasing Doubts on Deal

Xstrata Plc (XTA) is trading at a record discount to commodity trader Glencore International Plc (GLEN)’s 20.1 billion-pound ($31.8 billion) bid, suggesting investors increasingly believe this year’s biggest takeover will fail.

The discount to Glencore’s offer of 2.8 shares for each Xstrata share widened to 10.7 percent on Aug. 24, according to data compiled by Bloomberg.

Glencore Chief Executive Officer Ivan Glasenberg last week reiterated that he will rebuff calls for a higher bid. Sovereign wealth fund Qatar Holding LLC has increased its stake in Xstrata to 12 percent since the deal was announced Feb. 7 and is pressing for better terms. The takeover, on which investors are scheduled to vote on Sept. 7, would be the second-largest mining takeover if completed at current values.

“The prices of the stocks tell you that the deal is in trouble,” said Keith Moore, an event-driven strategist at MKM Partners LLC in Stamford, Connecticut.

Xstrata rose 0.1 percent to 927.7 pence in London on Aug. 24. Glencore climbed 0.2 percent to 366.85 pence. Trading in London is closed today for a public holiday.

Glencore, the largest publicly traded commodities supplier, is seeking to add Xstrata’s copper, coal and zinc mines to create the world’s fourth-biggest mining company and challenge rivals BHP Billiton Plc, Vale SA and Rio Tinto Plc. Glasenberg would be deputy CEO once the deal is done while Xstrata boss Mick Davis would be CEO.

 

Chinese Demand

That plan was thrown into doubt after Qatar Holding raised its Xstrata interest from 3 percent in February to a stake now worth at least 3.2 billion pounds. The fund said June 26 an exchange ratio of 3.25 Glencore shares would “provide a more appropriate distribution of benefits of the merger.”

The deal is poised against a background of moderating commodity demand as China’s economy slows. Glencore said Aug. 21 its first-half net income dropped 26 percent to $1.8 billion. Earlier this month, Xstrata reported a 33 percent decline in first-half earnings.

Glasenberg, 55, said last week he’s ready to walk away from the deal rather than overpay. Glencore may revisit the deal in a year or two if the current transaction doesn’t succeed, he said.

If Qatar votes against the bid, “they will block the deal,” Glasenberg said in an Aug. 21 interview.

“From my point of view, from Glencore’s point of view, so be it,” he said. “It’s not the end of the world.”

 

ISS Report

There is probably about a 40 percent chance that the bid succeeds, analysts at Liberum Capital Ltd. in London said in a note on Aug. 24.

“The widening of the bid spread reflects the market coming to terms with the increasing likelihood of a deal break,”Liberum said.

Charles Watenphul, a spokesman for Glencore, and Claire Divver, a spokeswoman for Xstrata, declined to comment.

The combination of Glencore and Xstrata can be blocked by just 16.48 percent of Xstrata holders under U.K. takeover rules because Glencore can’t vote its 34 percent stake.

Institutional Shareholder Services Inc., a proxy advisory service, said Aug. 22 that Xstrata shareholders should vote against the acquisition, which it described as being “marginal on economic merit.”

ISS also recommended Xstrata shareholders vote against proposed retention payments to keep Xstrata executives at the merged company. Xstrata investors Standard Life Plc and Fidelity Worldwide Investment in February criticized as excessive proposed payments of as much as 172.8 million pounds for 73 executives. Xstrata said in July the terms of incentive plan would be revised and be voted on at the Sept. 7 meeting

“My perception is the chances of this getting done here are probably low,” said Sachin Shah, a Jersey City, New Jersey-based special-situations and merger-arbitrage strategist at Tullett Prebon Plc. “It seems like Glencore’s CEO doesn’t really want to up the ante enough to get this to the finish line.

Source: Bloomberg

Glencore says $30bn Xstrata deal "not a must-do"

CEO Ivan Glasenberg said Tuesday the $30 billion bid for Xstrata is not a must-do deal, strongly suggesting it will not yield to key shareholder Qatar's demands for an improved offer.

LONDON (Reuters) -

Glencore's $30 billion bid for miner Xstrata is not a "must-do deal" its chief executive said on Tuesday, in making the company's strongest suggestion yet that it will not yield to key shareholder Qatar's demands for an improved offer.

Ivan Glasenberg, speaking after the commodities trader reported a smaller than expected drop in its first-half profit, expressed exasperation with Qatar Holding, which has been in a stand-off with Glencore since the sovereign wealth fund surprised the market by demanding an improvement to Glencore's offer of 2.8 new shares for every Xstrata share.

Qatar has increased to 12 percent a less than 3 percent stake in Xstrata since the all-share bid was announced earlier this year, less than Glencore's own 34 percent holding but enough to block the takeover under the current deal structure.

"We cannot understand the position of the Qataris, asking for more than the 2.8 ratio. We have seen nothing coming out of recent results that supports this. In fact we have seen quite the opposite," Glasenberg told Reuters in an interview. "It is not a must-do deal. It is a deal that we believe makes sense."

While Glasenberg, speaking three weeks before a Sept 7 vote, stopped short of saying he would definitely not raise the current offer, he told reporters and analysts to "take conclusions" from his comments, adding Glencore could walk away and return to the merger proposal in a year or two.

"It is unlikely anyone else will come and buy Xstrata, so it still sits there for us to look at some time in the future," he said. "It is not as if it is a deal we are going to lose, or that is running away from us."

Glencore, which listed precisely to gain the firepower to do bigger deals, announced in February it would bid for the Xstrata stock it does not already own in a move to create a mining and trading powerhouse. Qatar, however, broke months of silence in June by demanding a ratio of 3.25 to back the deal.

Neither Glencore nor Qatar, buying Xstrata shares almost daily, have shown any sign of blinking in the standoff. While several analysts said it was too soon to write off the merger, they also said on Tuesday the risk of collapse had risen.

"Our base case is still for a bump to (a share exchange ratio of) 3, but our conviction regarding a bump is weakening," Jefferies analysts said in note.

"It is not clear to us whether Glencore is talking down the market's expectations to soften Xstrata's oppositional shareholders, ultimately surprising to the upside with a bump to 3, or whether Glencore is just being completely transparent about its true intentions and does not plan to bump at all."

The market was also unclear, with Xstrata shares up by just over 1 percent at 920.1 pence at 1245 GMT and Glencore almost flat at 354.4 pence.

"Given the fact that maybe a bump from 2.8 to 3 - which is only about 7 percent - would do it, I still think that it'll probably get done at a little bit higher," analyst Nik Stanojevic at stockbroker Brewin Dolphin said.

Sources familiar with the negotiations had expected talks between Glencore and Qatar to resume after earnings and the end of Ramadan, but Glasenberg said no meeting was yet planned.

MARKETING HOLDS, PROFIT DROPS

Glencore said its net profit in the first six months of the year fell 26 percent, less than analysts had forecast as resilience in its trading business, even as margins shrank, offset the impact of falling commodity prices.

Like Xstrata earlier this month, however, Glencore used results presentations to investors to paint a picture of a company with standalone growth prospects.

Brushing off worries over the potential impact to its credit rating, currently two notches above junk, if the cashflow-rice Xstrata merger deal falls through, Glencore said it would continue to focus on brownfield expansions which it says are less likely to face cost overruns than greenfield projects being tackled by larger mining rivals.

The company said the structure of a long-awaited $3.2 billion deal to raise its stake in Kazakh metals producer Kazzinc to over 90 percent was under review, though should complete this year. Deal options were also arising elsewhere, however, with "knocks on the door" from financially stretched producers increasing, it said.

Glencore's net profit for the first half dropped to $1.81 billion, putting the miner on track to match its 2011 full year.

Overall operating profit for Glencore's trading arm fell 11 percent in the half - dented by poorer results from energy trading on what Glencore said were fewer arbitrage opportunities and a tough freight market, though the contribution of its largest trading arm, metals, rose on tight inventory levels.

The picture was more mixed in Glencore's industrial division, which houses its production assets ranging from coal mines to oil wells and farms and where operating profit fell 32 percent. That was largely due to the impact of falling prices in its metals operations, where profit more than halved.

Miners have had a tough time, reporting their first profit falls since 2009.

Two weeks ago Xstrata, one of the world's largest producers of copper and thermal coal, reported a 31 percent fall in first-half profits, despite cost cuts that helped the miner offset stubbornly high wages and inflation.

However, the miner also took a $514 million writedown on the value of its near 25 percent stake in troubled South African platinum miner Lonmin.

Glencore is also increasing profits from its agricultural commodities arm and said on Tuesday it expected to benefit from what it said was some of the toughest U.S. agricultural conditions since the 1930s Dust Bowl after a crippling drought, signalling higher prices and more arbitrage in the second half.

Source: Reuters

Colombian coal miners strike at Glencore-owned mines

Colombian coal miners went on strike on Thursday over pay and better working conditions at the La Jagua mining complex of Glencore's Prodeco unit, a union official said.

The walkout at La Jagua mines is unlikely to affect spot thermal coal prices in Europe or Asia unless it lasts for weeks, but many industry sources are watching whether workers from Colombia's main coal railway join La Jagua in a walkout.

"Right now everything is stopped," Ricardo Machado of the Sintraminergetica union told Reuters by telephone.

Miners at La Jagua authorized a walkout two weeks ago in Colombia, the world's fourth-largest coal exporter, after 40 days of negotiations with Prodeco failed to produce a deal.

The La Jagua complex has five mining concessions, but the negotiations were only with Carbones de La Jagua.

Machado said workers from the two other Glencore-owned mines, Carbones El Tesoro and Consorcio Minero Unido, had joined the strike, which started at 5:30 a.m. local time on Thursday.

The three areas produced 7 million tonnes of coal last year, according to mining regulator data.

Glencore was not immediately available to comment.

La Jagua's coal is the highest quality produced in Colombia and when not blended, is a niche market material, industry sources said. Glencore's Prodeco operations consist of La Jagua and Calenturitas. It has its own port facilities.

La Jagua has such a high-energy, low-sulphur coal that it often gets sold as pulverized coal for use in steelmaking.

In 2010, laborers at La Jagua went on strike for five weeks before signing a two-year deal, and last year, they struck for eight days at the 5-million-tonne-per-year Calenturitas mine.

Latin America has a history of tense ties among mining companies, unions, indigenous people and environmental groups.

Unions use strikes for leverage in bargaining talks with mining and oil companies, which have been returning to Colombia after a fall in guerrilla violence over the last decade due to a U.S.-backed military offensive.

Source: Reuters

Canada clears Glencore’s Viterra acquisition

Canada’s Industry Minister Christian Paradis has approved London-listed Glencore’s $6-billion takeover of agribusiness Viterra.

The Minister said in a statement that the deal, which was approved under the Investment Canada Act, would be of net benefit to the country.

Glencore has made a series of commitments to Canada for a five-year period, including increasing Viterra's projected capital expenditures in Canada by more than C$100-million; investing C$8-million above Viterra's projected expenditures in research and development and contributing toward grain industry initiatives in the province of Manitoba.

The company is also looking into working with the Saskatchewan government toward establishing a Global Institute for Food Security and contributing to this initiative should the Saskatchewan government initiate the project; while increasing contributions toward programmes supporting the Western Canadian farm community by 25% and making charitable contributions in support of youth and educational scholarships for First Nations and Metis.

Glencore has also committed maintaining the Regina head office and making it the head office for its North American agricultural operations.

“Glencore is committed to investing in Viterra's operations, its philanthropic initiatives and in playing a key part in ensuring the continued growth of western Canada's agricultural industry," Glencore agricultural products director Chris Mahoney said.

Separately, Glencore has also received notification from the Ministry of Commerce of the People's Republic of China (Mofcom) that it has moved to the next phase of review, which is not uncommon for transactions being reviewed by Mofcom.

Glencore continued to engage with Mofcom to ensure approval as soon as possible.

Mofcom's approval was not expected before the end of July.

Edited by: Mariaan Webb

Xstrata sets September date for Glencore vote

Xstrata said shareholders will now vote on September 7 on the miner's planned $26-billion takeover by Glencore, after changes to unpopular retention deals for top executives forced it to push back a meeting scheduled for this week.

A new date had been expected after deals to tie in Xstrata's top managers were overhauled at the end of last month, following shareholder protests over mostly cash packages that were not tied to performance.

But a vote on September 7, later than strictly required, will also give commodities trader Glencore, Xstrata's largest investor, six more weeks to hammer out a deal over the terms of the takeover with rival shareholder Qatar Holding, which is demanding better terms - easing speculation that the current deadlock between the two could put the tie-up on ice.

While the September date is still moveable, sources familiar with the matter and analysts said it marked a deadline of sorts and a goal for the talks between Glencore and Qatar's sovereign wealth fund, which owns 11% of the miner.

Qatar, which has built the second-largest stake in the miner, said last week it was firm in its demand for Glencore to improve its offer to 3.25 new Glencore shares for every Xstrata share held, up from the 2.8 on offer.

Glencore, for its part, has indicated it could walk away.

Under takeover rules, Glencore has until two weeks before the vote date to alter the terms of its offer - a later move is possible but would push the date back again.

Xstrata - which was caught in a "shareholder spring" that has seen shareholder protest over pay across sectors - said on Wednesday its new retention packages for top executives would be in shares only and be dependent on executives reaching a further $300-million of cost savings beyond planned synergies.

Xstrata also said it continued to expect the merger to complete in the fourth quarter.

Antitrust reviews were progressing, the miner said, with an ongoing process in China and South Africa and constructive discussions with the European Union ahead of a formal notification, expected in coming weeks.

The combination of Glencore and Xstrata was expected to be an acquisition powerhouse, as both have a track record of growing through deals.

Glencore announced, separately on Wednesday, it would buy Brazilian miner Vale's European manganese ferroalloys operations for $160-million, moving into the production of a key steelmaking ingredient.

"This small transaction is characteristic of Glencore's opportunistic and piecemeal M&A strategy and it marks its first foray into manganese production," analyst Dominic O'Kane at Liberum said in a note.

Source: Reuters

Qatar iron man faces off with Glencore on Xstrata deal

Bankers who have dealt with Ahmad al-Sayed, the Qatari investment manager holding the fate of Glencore's takeover of Xstrata, all agree he is a tough negotiator, someone who will cut the deal at the terms he wants.

Ahmad al-Sayed, the Qatari investment manager holding the fate of Glencore's $26 billion takeover of Xstrata in his hands, is known as an aggressive negotiator who relishes the big deal.

The lawyer was formerly general counsel at Qatar Investment Authority (QIA), the sovereign wealth fund of the gas-rich Gulf state, before taking the helm as chief executive of Qatar Holding in 2008.

Well-liked and trusted by Sheikh Hamad bin Jassim al-Thani, the Qatari prime minister who is also chief executive of QIA and chairman of Qatar Holding, he has significant influence at the top level where decisions are made.

"An iron man, and a hedge fund manager in disguise, he can easily kill a deal if it doesn't suit him," said one banker who knows him personally.

"And why not? Don't the Qataris have the money? There could be a compromise but it's ultimately their way or no way."

"We respect him for his smartness but we dreadfully fear him for his aggressiveness. One day you're closing a deal and the next you're flushed away."

Commodities trader Glencore is fighting to save its deal after Qatar Holding, QIA's investment arm which has built a stake of around 11 percent in Xstrata since February, issued a late demand for better terms, forcing them to push back the timing of the deal.

Sayed, who is in his late thirties and studied law and business in Qatar, Paris and Boston, is leading talks with Glencore about the deal.

UNFOLDING DRAMA

"I'm enjoying watching the soap opera from a distance," said British deal broker Amanda Staveley, who helped orchestrate Abu Dhabi's 2008 investment in Barclays and knows Sayed, describing him as bright, utterly professional and very diligent.

"Qatar has been using decent strategies lately and I kind of assume he's the man behind it."

Qatar's unexpected intervention - an unusually aggressive step for a fund that has hitherto been content with a less muscular role in its portfolio - has set off a new round of negotiations, putting in doubt a deal that would create the world's fourth-biggest mining company.

Signs of Qatar's new stance may have been evident in April. Speaking on the sidelines of a Doha conference, Sayed outlined his ambitions for Qatar Holding.

"We should always be active. To be passive is not healthy. Our intention will always be to add as much value as possible and to improve the company we invest in," he said.

Bankers who have dealt with Sayed all agree that he is a hard negotiator, someone who will cut the deal at the terms he wants.

In the last four to five years, every deal done by Qatar Holding - which controls an investment fund of at least $100 billion - has had his stamp on it, said a Dubai-based banker.

"He is tough and you know where you stand with him once he makes a decision," said one London real estate source who knows him by reputation.

"He has taken (Qatar Holding) to a level of sophistication and confidence that helps them to make the kind of calls they have taken in the Glencore/Xstrata merger," said another banker.

MISSTEPS

Qatar, well known for trophy investments like London's Harrods department store, Canary Wharf, and stakes in Hochtief, the German construction group, Porsche and Volkswagen, which owns Audi and Lamborghini, and has invested in Barclays and Credit Suisse, is shifting its sovereign wealth fund assets into commodities like gold and oil.

Sources told Reuters last month that QIA has bought a stake in Royal Dutch Shell, while also reportedly eyeing a chunk of Italian oil major ENI (ENI.MI).

"The Qataris in general don't do a deal unless the terms are right. It doesn't matter how many deals they do as long as they are profitable. And they are making money on most of the deals, including Goldfields," said a banker from London.

Qatar's investment fund had to sit on the side late last year waiting for the outcome of European Goldfields's C$2.5 billion ($2.4 billion) takeover by Canadian group Eldorado Gold despite an earlier agreement to provide a $600 million project financing loan to European Goldfields.

The banker said Sayed Ahmad was not happy with how the Goldfields deal unfolded but ended up making money on the deal.

"He is tough like a rock but makes compromises when least expected. He even backs off when needed."

Source: Reuters

Glencore protests at Bolivia mine nationalisation

Angered by the nationalisation of a tin and zinc mine in Bolivia, global commodities firm Glencore said on Friday it may seek compensation domestically or abroad.

Bolivia's leftist government, headed by Evo Morales, took over operations at the Colquiri mine on Wednesday after weeks of violent protests.

Morales, who has already nationalised the Andean country's natural gas and electricity industries, said the decree brought the local operating company Sinchi Wayra - which has been owned by Glencore since 2005 - back into state hands, resolving the dispute between employees and independent miners that has left 18 injured.

Glencore said on Friday that it would seek an orderly handover of control of the mine but condemned the government's action.

"Glencore strongly protests the action taken by the government of Bolivia and reserves its rights to seek fair compensation pursuant to all available domestic and international remedies," the company said in a statement.

Liberum Capital analyst Dominic O'Kane said the mine was "tiny" in the context of Glencore's international operations.

"It's a tiny, tiny mine. It's not particularly significant. It's a small negative," he said.

However, Glencore queried the effect the move would have on foreign investment in Bolivia, where Morales is seeking to capitalise on high metals prices with sweeping mining reforms.

"The action taken by the government of Bolivia will pose a number of serious questions relating to the government's future policy towards foreign investment in the mining sector," Glencore said.

It said it had paid over $300-million in fees to Bolivia, including over $70-million for Colquiri, and would have invested over $160-million over the next five years in the country.

Glencore shares were down 2.4% to 315 pence at 11:54 GMT, compared to a European mining index down 1.7%.

Source: Reuters

Glenstrata takes shape this week

The prospectus giving details of the creation of a $90 billion mining and commodities trading behemoth will find its way to the inboxes of shareholders this week.
 
The proposed deal between Swiss-based and London-listed Glencore International and Xstrata has been facing stiff opposition from Xstrata shareholders who accuse Ivan Glasenberg, chief of Glencore, and Xstrata CEO Mick Davis of negotiating “a cosy stitch-up” without consulting them about getting a better offer rather than a 'merger of equals.'
 
Glasenberg and Davis received a boost to their chances of selling the deal a fortnight ago when the oil and natural gas rich nation of Qatar said it has plans to up its stake in Xstrata to over 10%, which would make the country’s sovereign wealth fund the diversified miner’s second largest shareholder.
 
Glencore already owns 34% of Xstrata. Glencore is offering 2.8 shares for every one of Xstrata, but aside from second largest shareholder BlackRock, other institutional investors have threatened to block the deal.
 
Qatari support should provide Glasenberg and Davis the necessary backing they need to push through the deal.  75% of shareholders must vote in favour of the deal with Glencore prevented from voting.
 
Those holding out for a sweetener – something Glasenberg has repeatedly rejected – point to the fact that growth prospects for Xstrata is much healthier than Glencore.
 
Xstrata is the world’s biggest exporter of thermal coal and the fourth-largest copper producer and in the decade under Davis has gone from having a fewer than 2,500 employees to a workforce exceeding 70,000 in 20 countries.
 
A combined Xstrata and Glencore would have revenues in excess of $100 billion with as much as 80% of sales earned from mining.
 
Even before building up Xstrata through a series of billion dollar transactions, Davis was a formidable dealmaker who with fellow South African Brian Gilbertson created Billiton. Davis left for Xstrata after Billiton was sold to BHP in 2001.
 
Glasenberg and Davis both cut their teeth in their native South Africa’s coal industry in the 1980s.
 
Glasenberg is no slouch when it comes to buying up companies either. In March Glencore snapped up Canada’s grain handler and agricultural retailer Viterra for $6 billion.
 
Apart from shareholders blocking a deal the European Union is stepping up scrutiny of the mooted merger after steelmakers and other European players "raised fears that the deal could create too powerful a player" in the market for zinc, nickel and coal.

Glencore Takes Control of Mutanda With $480M Deal

Glencore has taken majority control of its fast-growing Mutanda copper operation in Congo with deals worth $480 million, marking the first step in a planned merger of the mine with its nearby Kansuki concession.

Mutanda, in central Africa's copper belt, is one of Glencore's main growth assets and a key operation in the Democratic Republic of Congo alongside its Katanga asset, largely thanks to its high ore grades and low expansion costs.

But Tuesday's deal, with two related, privately controlled groups - High Grade Minerals (HGM) and Groupe Bazano - whose ownership is not disclosed by Glencore, is also likely to revive debate over the opacity of deals in one of Africa's most promising but also most challenging mining destinations.

Glencore, a lightning rod for campaign groups since its listing last May, earlier this month faced calls for greater transparency around its deals in Congo.

The company said on Tuesday it had paid $340 million in cash to acquire both a further 24.49 percent in Samref Overseas, the top holding company above Mutanda, taking its hold in the controlling entity to almost 75 percent, and a further 1 percent in Samref Congo, a second holding company. The deals take its indirect equity interest in Mutanda Mining to 60 percent.

Glencore, hoping to accelerate development of the copper operations with Tuesday's move, has also acquired shareholder debts amounting to around $140 million.

"The acquisition represents a significant first step towards achieving Glencore's previously announced intention to merge the Mutanda and Kansuki mining operations," Glencore said.

Glencore has the right to acquire the remaining 25.5 percent stake in Samref Overseas still held by HGM for $430 million in December next year, subject to the terms of a put and call option agreement.

The combination of Mutanda, already producing at an annualized copper rate of 78,000 tonnes per year, and the extensive Kansuki concession will produce 160,000 tonnes per year of copper cathodes and 23,000 tonnes of cobalt in hydroxide by the first half of next year.

Analysts welcomed what they said was progress on Glencore's plan to integrate Kansuki and Mutanda and boost its production profile, but anti-corruption group Global Witness said Glencore should give more detail on its counterparties in the deal.

The pressure group earlier this month revived concerns over the sale of a direct 20 percent stake in Mutanda last year by Congolese state mining company Gecamines to influential Israeli businessman Dan Gertler for $120 million, a price tag which some analysts have said was below its real value.