LONDON--Swiss commodities broker Glencore International PLC
(GLEN.LN) said Tuesday the Ministry of Commerce of the People's
Republic of China, or MOFCOM, has cleared its merger with Xstrata
PLC (XTA.LN) subject to certain conditions, adding that Mick Davis
has agreed not to take up the six month role of Chief Executive
Officer and Executive Director of Glencore Xstrata PLC following
completion of the merger.
MAIN FACTS:
-Mr. Davis will step down from Xstrata PLC upon completion of
the merger, allowing Glencore CEO Ivan Glasenberg to assume the
role of Chief Executive Officer of the combined Group from the
effective date - expected May 2.
-Conditional on the merger becoming effective, Mr. Davis will
receive a sum equal to the pay, bonus, benefits and pension
allowance he would have been entitled to receive for the six month
period (being 4.63 million pounds) as a result of such
termination.
-Mr. Davis has agreed to act as a consultant to the Combined
Group until June 30 to assist with an orderly handover.
-As disclosed in the Glencore/Xstrata public documents, Mr.
Davis's existing employment with the Xstrata Group will terminate
on the effective date of the merger following which he will
additionally receive a sum equal to 100% of his annual salary, 2011
bonus and other benefits and pension allowance in accordance with
the terms of his existing contract with the Xstrata Group.
-Glencore shall sell its post-merger ownership interest in Las
Bambas, a copper project currently being developed by Xstrata in
Peru to a purchaser approved by MOFCOM before Sept. 30, 2014 for
not less than the pre-determined price with completion to occur by
June 30, 2015.
-Pre-determined price shall be the higher of:
* the fair market price of Glencore's ownership interest in Las
Bambas as evaluated according to industry practice by two
independent investment banks chosen by Glencore and confirmed by
the monitoring trustee and;
* the total of all of the costs actually incurred by both
Glencore and Xstrata in Las Bambas, as audited and confirmed by the
monitoring trustee.
-Glencore will start the sale process and announce its offer to
sell its ownership interest in Las Bambas within three months of
MOFCOM's announcement Tuesday.
-If Glencore fails to enter into a binding sale and purchase
agreement by Sept. 30, 2014 or fails to complete the transfer of
its ownership interest in Las Bambas by June 30, 2015 then,
Glencore must appoint a divestiture trustee to sell by way of
auction its ownership interest in one of Tampakan, Frieda River, El
Pachon or Alumbrera, as designated by MOFCOM, at no minimum price
within three months from Oct. 1, 2014 or July 1, 2015, as the case
may be.
-For a period of eight years from Jan. 1, 2013, Glencore will
continue to offer to supply Chinese customers with a minimum volume
of copper concentrate annually under long-term contracts, with such
minimum volume being equal to the average volume of copper
concentrate supplied to Chinese customers under long-term contracts
by both Glencore and Xstrata in 2011 and 2012 namely 900,000 dry
metric tons.
-Price for a minimum of 200,000 dry metric tons of copper
concentrate will be offered in accordance with the applicable
annual benchmark price agreed between major miners and major
smelters during annual supply negotiations and the price for the
remaining 700,000 dry metric tons of copper concentrate will be
offered with reference to the applicable annual benchmark
price.
-For a period of eight years from Jan. 1, 2013, Glencore will
continue to offer to supply Chinese customers with zinc concentrate
and lead concentrate through long-term contracts and spot
contracts, the offered terms of which, including those in relation
to price, will be fair and reasonable and in accordance with
prevailing international market terms after taking into account
product quality, volume, delivery period, payment terms, buyer
creditworthiness and any other relevant circumstances.
-Glencore shares at 1105 GMT up 12 pence, or 3.6%, at 333 pence
valuing the company at GBP22.8 billion; Xstrata shares up 43 pence,
or 4.47%, at 1010 pence, valuing the company at GBP29.02
billion.
-Write to Ian Walker at ian.walker@dowjones.com
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