Xstrata Backs This New Buyout Bid

Swiss mining company Xstrata (XTA.L) will be asking its shareholders to support a revised $33 billion takeover bid from commodities trading giant Glencore (GLEN.L). The new deal decouples a controversial $226 million compensation package for 70 of Xstrata’s top executives meant to prevent them from quitting as the power structure changes.

The Xstrata board is encouraging investors to accept the bid, which will now allow them to vote against the retention plan without jeopardizing the merger. As part of the new conditions, Glencore’s top shareholder Ivan Glasenberg would be named as chief executive. Concerns surrounding the fate of Xstrata’s CEO Mick Davis have added overall pressure surrounding the executive payment plan.

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According to Reuters, a top institutional investor in Xstrata said, “I am glad they have recommended the deal and also very pleased that they have unbundled the remuneration issue. As much as I, personally, think that the two companies will be better off merged, it would have been hard to vote in favour of the retention packages.”

Glencore, also based in Switzerland, is the world’s largest commodity trading company. Xstrata is one of the major producers of coal, copper, and nickel with $32.65 billion in revenue over the last twelve months. If the acquisition is successful, it will be the second-largest in the industry, only behind the $38 billion purchase of Alcan by Rio Tinto (NYSE:RIO) in 2007.

The Qatar Investment Authority holds about 12 percent stake in Xstrata and resisted Glencore’s original offer of 2.8 new shares for every Xstrata share it didn’t already hold. Qatar suggested 3.25, and the settlement came to 3.05.

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