By Dana Cimilluca and Alex MacDonald
LONDON--Glencore International PLC officially put its revised
offer for Xstrata PLC to the miner's board and shareholders,
seeking to win their approval for new terms and keep the historic
merger deal from turning hostile or collapsing.
Glencore on Monday solidified and expanded on an informal offer
it had made to Xstrata's board Friday, in a last-ditch effort to
save the deal. The world's biggest commodities trader said that
according to its new plan, Xstrata Chief Executive Mick Davis would
lead the combined company for six months, before giving way to
Glencore CEO Ivan Glasenberg, and that Xstrata chairman John Bond
would be permanent chairman. On Friday, Glencore had said only that
Mr. Glasenberg would be CEO, rolling back a prior plan for Mr.
Davis to take that job.
Switzerland-based Glencore confirmed other aspects of its new
plan, including a price of 3.05 Glencore shares for every Xstrata
share, up from a prior ratio of 2.8. But Glencore added Monday that
it will not raise its offer further.
The move represents the latest chapter in a years-long effort on
the part of Mr. Glasenberg to complete a full-takeover of Xstrata,
which Glencore helped build into the mining juggernaut that it is
today and in which it already owns a 34% stake.
Market reaction to the deal suggests that investors are
increasingly confident it will happen. On Monday, Xstrata shares
rose 2.4% in midday in London to 1,038.5 pence, and Glencore shares
fell just over 1% to 373.86 pence. That puts the closely watched
deal ratio at 2.78, nearer to the new offer than it was Friday.
Still, the deal is far from done. Xstrata's reaction to the
rough proposal Friday was frosty, with the miner questioning the
price and other aspects of the new governance. Before the new offer
surfaced, Mr. Glasenberg had offered Mr. Davis the interim CEO role
and he rejected it, people familiar with the matter said Friday.
It's unclear whether his view has changed.
Xstrata said Monday morning that it will study the particulars
of the new offer and, in consultation with its shareholders, decide
by Sept. 24 how to proceed.
Xstrata's board faces a delicate dance in deciding whether to
accept or reject the new offer. It has been criticized for signing
off on a deal in February that Xstrata's shareholders later deemed
insufficient, and it doesn't want to be seen as out of sync with
their will again. On the other hand, it has stressed in the past
the importance of having its management in key roles in the new
company, which will garner the bulk of its earnings from Xstrata's
coal and other mining operations.
If completed, the tie-up would be the biggest corporate deal of
the year, valued on Friday at about $36 billion. It would create a
unique mineral extraction and distribution company with a market
value of about $75 billion based on current share prices.
Glencore's latest offer came, just as Xstrata shareholders were
set to vote on it at a meeting in Zug, Switzerland, on Friday
morning. After investors including Qatar Holding LLC, Xstrata's
second-biggest shareholder with a 12% stake, came out publicly
against the old price, the deal was all but doomed given the high
level of shareholder support required under the deal's
structure.
Glencore said Monday that the new offer is its "best and final,"
which under U.K. takeover rules leaves it little or no scope for a
further increase.
But Glencore also said it could switch the deal to a takeover
offer--instead of a merger--with the consent of the U.K. takeover
panel and Xstrata. While it's far from certain that either party
would consent to such a move, such a switch would make it easier
for Glencore to win shareholder approval. Currently, 75% of
Xstrata's non-Glencore shares have to be voted in favor of the deal
for it to pass. Glencore isn't allowed to vote. Under a takeover
arrangement, however, the deal could be approved by a simple
majority of Xstrata shares and Glencore would be allowed to
vote.
A contentious aspect of the deal has been a retention package
that was originally put in place to keep Xstrata managers at the
combined company. The package was revised in June after some
Xstrata shareholders said it was too generous.
Glencore said Monday that it was content with the 173 million
British pounds ($277 million) package, but called on Xstrata's
board to consult with its shareholders to see whether further
adjustments should be made.
Xstrata shareholders have to approve both the retention package
and the merger itself in separate votes in order for the deal to go
ahead. A new vote date has not been set yet.
Opinion among Xstrata shareholders on the new terms so far
appears to be mixed.
Standard Life Investments, Xstrata's seventh-largest
shareholder, said Friday that it supported the revised offer, while
Knight Vinke, a top 30 Xstrata shareholder, said the revised
share-swap ratio was insufficient.
Qatar Holding, which remains publicly silent on the matter, is
said to be more receptive to the new share-swap ratio, although it
has questions about the new governance structure and whether the
price is sufficient given that, however it is officially
structured, the deal now appears more like a takeover than a
merger.
Xstrata said Monday that it has agreed to announce by the
morning of Sept. 24 whether or not it intends to put Glencore's
increased proposal to shareholders. If so, it will publish its
response on all elements of the proposal at that time, the company
said.
Write to Dana Cimilluca at Dana.Cimilluca@wsj.com and Alex
MacDonald at Alex.MacDonald@dowjones.com