-- Knight Vinke reaffirms its intention to vote against the
Glencore-Xstrata 2.8 share swap merge ratio
-- Knight Vinke joins a chorus of other sharesholder who oppose
the current offer and who could potentially block the deal
-- Knight Vinke to consult with shareholders on how to make
Xstrata's board more robust, independent if deal fails
-- Liberum Capital says probability of deal breaking apart is
close to 70%
(adds details, analyst comment and updates share price)
By Alex MacDonald
LONDON--Activist investment fund Knight Vinke Asset Management
reconfirmed Friday that it intends to vote against the current
merger proposal between commodities titan Glencore International
PLC (GLEN.LN) and Anglo-Swiss miner Xstrata PLC (XTA.LN) unless the
terms are, "materially improved."
Knight Vinke, Xstrata's 21st-largest Xstrata shareholder with a
0.51% stake according to FactSet, joins two other large
shareholders who said Thursday they would vote against the current
proposal to create a mining behemoth with a market capitalization
of about $68 billion, based on current share prices.
Qatar Holding, Xstrata's second largest shareholder after
Glencore with a 12.3% stake, and Richard Buxton, the fund manager
of the Schroder U.K. Growth Fund, a unit of Schroder Investment
Management Ltd., said Thursday they wouldn't accept the current
offer to swap 2.8 Glencore shares for every Xstrata share. Schroder
Investment Management Ltd. owns a 1% stake in Xstrata.
The three entities alone could potentially block the deal in a
Sept. 7 shareholder vote. Shareholders representing just over 16%
of Xstrata's share capital need to vote against the deal in order
to scuttle it. Glencore, which owns a 34% stake in Xstrata, isn't
allowed to vote.
"If the board of Glencore is unwilling to pay for acquiring the
control it seeks, we would support Xstrata's continuing
independence as a fundamentally strong and successful business--and
one which would be likely to attract a significant premium were
there subsequently to be interest from third parties," said David
Trenchard, Knight Vinke Investment Management's vice-chairman.
"Should the transaction fail to be approved, we intend to
consult with other shareholders regarding the composition of the
Xstrata board, so as to make it more independent and robust," he
added.
Mr. Buxton aired similar views when he told the Wall Street
Journal that both Xstrata's chairman and independent board members
should be replaced if the deal fails. Mr. Buxton, however, said
Xstrata's management team should be given further incentives to
continue leading the company through its next growth phase.
At 1049 GMT, Xstrata's shares were up 2.2% at 921 pence a share
while Glencore's shares were up 3% at 368 pence a share, resulting
in a share swap ratio of 2.50 at current prices.
Mining equity analyst Ash Lazenby of Liberum Capital said he
expects that the "probability of a break [in the deal] is closer to
70%." He noted that the two companies are increasingly trading on a
standalone basis and if the deal fails, Glencore could outperform
its peers by 25% while Xstrata will face limited downside.
-Write to Alex MacDonald at alex.macdonald@dowjones.com
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