Xstrata board backs Glencore merger


The board of mining group Xstrata has recommended that shareholders back the merger terms offered by commodities trader Glencore.

Shareholders will now vote on whether to accept the offer of 3.05 Glencore shares for every Xstrata share.

Glencore had raised its offer after its first bid was opposed by key Xstrata shareholders, including Qatar Holding, the Gulf state's sovereign wealth fund.

A merger would form one of the world's biggest metals and commodities firms.

"The strategic rationale for combining Xstrata and Glencore remains highly compelling," said Xstrata's chief executive Mick Davis.

"A merger will fuse the respective strengths of the two companies into a unique natural resources company. It will also resolve Xstrata's ownership structure in a way that I believe will create a superior shareholder value as part of a larger, more diverse company with an enhanced ability to grow and create value for its owners."

Glencore boss Ivan Glasenberg said he was "pleased" Xstrata directors had recommended the deal, "which offers Xstrata shareholders a significant premium [on the current share price]".

In late morning UK trading Xstrata's shares were up more than 3%. Glencore's were less than 1% higher.

Revised structure

When Glencore had made its original offer of 2.8 Glencore shares for every one Xstrata share in February, Qatar Holding, which owns a 12% holding in Xstrata, had said that it wanted an offer of 3.25 shares.

Concerns were also raised about the proposed management structure of a merged company. In response, it was agreed that Mr Davis would become chief executive for six months before being replaced by Mr Glasenberg.

Mr Davis would then step down from the board, with another Xstrata executive taking his place, "to preserve the majority of Xstrata directors on the board".

Xstrata shareholders will therefore vote on two resolutions. The first is to approve the Glencore offer subject to the revised management structure being passed.

The second is to approve the offer without the management structure being passed.

Xstrata said its independent non-executive directors only intended to recommend unanimously the first resolution.

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