April 1, 2023

DealBook: Glencore’s Takeover of Xstrata Gains Chinese Approval

Mick Davis, chief of Xstrata, was expected to head the merged company for six months but will now step down as soon as the takeover is finished.Fabrice Coffrini/Agence France-Presse — Getty ImagesMick Davis, chief of Xstrata, was expected to head the merged company for six months but will now step down as soon as the takeover is finished.

LONDON – The commodities trader Glencore International received final regulatory approval from China on Tuesday, clearing the way for its proposed $30 billion takeover of the mining company Xstrata.

To ease Chinese antitrust concerns, Glencore said it would sell a Peruvian copper mine currently owned by Xstrata.

The combined mining and commodities trading company would be one of the world’s largest producers of copper, and the Chinese authorities had been worried that its local companies might face higher prices for a variety of metals.

The Ministry of Commerce, which dragged its feet for more than a year after Xstrata’s shareholders initially balked at the price of the proposed all-share offer from Glencore, is the final regulator to back the deal.

European antitrust authorities approved the takeover in November after Glencore agreed to sell assets and reduce its operations on the Continent, while South African regulators signed off on the deal this year.

Shares of Glencore rose 3.5 percent in afternoon trading in London, while Xstrata’s shares rose 4.5 percent.

Glencore said Mick Davis, the chief executive of Xstrata who was expected to head the merged company for six months, would now step down as soon as the takeover was completed.

Mr. Davis had been at the center of tense negotiations last year as the sovereign wealth fund Qatar Holding, a large Xstrata shareholder, pressed Glencore to improve its original offer.

Glencore eventually relented, raising its offer to 3.05 of its shares for each Xstrata share from its initial 2.8-share proposal.

In return, however, Glencore had demanded that its chief executive, Ivan Glasenberg, take over from Mr. Davis of Xstrata earlier than previously announced.

The original takeover offer had called for three Xstrata executives – Mr. Davis; John Bond, the chairman; and Trevor Reid, the chief financial officer – to hold the same positions at the merged company.

The agreement with China’s antitrust authorities requires Glencore to sell Xstrata’s Las Bambas copper mine in Peru. Glencore said it would inform the regulators about the sale no later than the end of July, with a potential sale to be completed by next summer.

Glencore also agreed to supply Chinese companies with a minimum amount of copper, zinc and lead concentrate through the end of the decade to ease concerns that China might face shortages metals needed for its local economy.

The deal is expected to be completed next month.

Article source: http://dealbook.nytimes.com/2013/04/16/glencores-30-billion-takeover-of-xstrata-gains-chinese-approval/?partner=rss&emc=rss

DealBook: Glencore Offers Concessions to Win Support for Xstrata Deal

LONDON – The commodities trader Glencore International has offered concessions to European antitrust authorities in a bid to win support for its $33 billion proposed takeover of the mining company Xstrata.

In response, the European Union pushed back its deadline to rule on the deal by two weeks, to Nov. 22. The transaction would create one of the world’s largest diversified mining and trading companies.

The announcements come as Glencore and Xstrata continue to seek shareholder approval after many investors balked at the initial offer of 2.8 shares in Glencore for every share in Xstrata.

Glencore raised its offer last month to 3.05 shares for each Xstrata share, though it said that as part of the revised deal, Glencore’s chief executive, Ivan Glasenberg, should take over as head of the combined group earlier than had been planned.

Xstrata’s shareholders, including the sovereign wealth fund Qatar Holding, will meet on Nov. 20 to decide whether to approve deal. To reach a deal, 75 percent of Xstrata’s eligible shareholders must support it. Glencore, which owns 34 percent of Xstrata, will not be permitted to vote.

Neither Glencore nor the European Union gave details on the concessions that were offered to win antitrust backing. Potential disposals may include parts of its zinc metal operations, according to Reuters.

The proposed acquisition has been hampered by several shareholder revolts.

Part of the anger has focused on bonuses that Glencore and Xstrata had been negotiating to retain top executives. The payouts could be worth more than $200 million.

Some institutional investors, including BlackRock and Legal and General, have opposed the payments because they are viewed as extravagant. The opposition prompted Xstrata to revise the bonus packages to link them more closely to performance targets, though the overall cost is similar.

Article source: http://dealbook.nytimes.com/2012/10/31/glencore-offers-concessions-to-win-support-for-xstrata-deal/?partner=rss&emc=rss

DealBook: Glencore Increases Offer in Bid to Secure Xstrata Deal

12:32 p.m. | Updated 9:28 a.m. | Updated

LONDON — Glencore International, the world’s biggest commodities trader, sweetened its offer for Xstrata in a last-minute bid to save the mega-merger with the large mining company.

The commodities trader is trying to win over investors. In recent months, the second-largest Xstrata shareholder, Qatar Holding, the sovereign wealth fund of the Persian Gulf nation, threatened to block the deal unless Glencore raised its bid.

Under a new proposal, Glencore offered 3.05 of its shares for every Xstrata share, valuing the combined company at $90 billion. The commodities trader had initially agreed to exchange 2.8 shares. For months, Qatar Holding, which owns 12 percent of Xstrata, had held out for a ratio closer to 3.25.

While upping the price, Glencore also added conditions to the deal. Under the new proposal, Ivan Glasenberg, Glencore’s chief executive, would lead the merged company. Previously, Mick Davis, the head of Xstrata, was set to take over as chief executive.

Glencore also wants the option to restructure the deal as a takeover, rather than a merger. By doing so, the company would only need 50 percent of Xstrata investors to approve the deal. Glencore, which owns roughly 34 percent of Xstrata, could also vote its shares. As a merger, Glencore would need 75 percent of the shares and would have to sit out the vote, making it more difficult to get approval.

“This is now a lot cleaner deal,” said Michael Rawlinson, head of natural resources at Liberum Capital in London. “It’s more of a takeover with Ivan as C.E.O.”

Glencore shares fell 4 percent in midday trading in London, while stock in Xstrata rose 7.7 percent on Friday.

But it’s not clear whether the new terms will appease Xstrata shareholders.

On Friday afternoon, Xstrata said it was awaiting more details, saying the new Glencore proposal “lacks sufficient information on key elements.” The mining company raised some initial objections, saying the new ratio of 3.05 Glencore shares for each Xstrata share implied a premium that “is significantly lower than would be expected in a takeover.”

Xstrata said the ratio of 3.05-to-1 would constitute a 22.2 percent premium to its closing price on Thursday. In 35 proposed mining deals over the eight years to 2011, the weighted average premium paid was 31 percent, according an HSBC report published in February.

Xstrata also highlighted the “significant risk” of Mr. Davis and his management team leaving the new company. Glencore-Xstrata would derive most of its earnings from mining, but it would now potentially be run by Glencore executives, who have been focused on commodities trading.

An Xstrata representative did not specify the date of a new shareholder vote on the deal.

The two sides have been at a stand-off for months.

After going public last year, Glencore moved quickly to strike a deal with Xstrata. The merger seemed natural because the two companies have been deeply intertwined for years.

But Xstrata shareholders balked at the price, with Qatar leading the push. After a multibillion-dollar spending spree, the sovereign wealth fund increased its stake in Xstrata to 12 percent, gaining more sway in the fight.

Glencore seemed unwilling to budge. Last month, Mr. Glasenberg said that it would be “no big deal” if the merger failed. He had held firm in public that no change of terms would be forthcoming and suggested that Glencore could make a new offer for Xstrata next year.

As the fight dragged on, the broader commodities business started to falter. Metal prices have fallen sharply this year, hurting Xstrata’s earnings, which fell 33 percent in the first six months of the year.

The new proposal came together at the 11th hour.

Mr. Glasenberg made the new offer to Qatar around 9 p.m. London time on Thursday, according to a banker to one of the two companies, who spoke on the condition of anonymity because he was not authorized to speak publicly.

“This is all about face-saving,” the banker said. A higher offer “was always there as a possibility,” he added. But Qatar and Glencore’s hardening public opposition had blocked all lines of communication and potential compromise.

Simon Murray, Glencore’s chairman, adjourned the Glencore shareholder meeting shortly before it was due to begin on Friday morning in Zug, Switzerland. Developments “happened very recently overnight,” Mr. Murray told shareholders who had gathered for the vote.

While Qatar won improved terms, it may have to compromise on the issue of executive management. Qatar spent $5 billion buying Xstrata shares in part because of its confidence in Mr. Davis and his team.

“We are supportive of the improved terms and the changes to the executive governance arrangements,” said David Cummings, head of equities at Standard Life Investments, a fund manager that owns 1.4 percent of Xstrata and 0.8 percent of Glencore. “The deal will, we believe, enhance the growth prospects of the combined group.” Previously, Mr. Cummings had criticized the deal, calling the earlier offer “inadequate.”

Article source: http://dealbook.nytimes.com/2012/09/07/glencore-postpones-meeting-in-bid-to-secure-deal/?partner=rss&emc=rss

DealBook: Glencore Announces I.P.O., Seeking Up to $12.1 Billion

Preparations for the jumbo stock market debut of Glencore International took a big step forward Thursday when the commodities producer and trader formally announced its intention to float on the London and Hong Kong stock exchanges later this year.

Glencore, which is based in the Swiss town of Baar and employs nearly 58,000 people around the world, is aiming to float a stake of up to 20 percent.

The main offer could raise as much as $11 billion, the bulk of that in London.

That amount could be beefed up by another 10 percent if good demand allows for more shares to be sold, Glencore said in a statement declaring its intentions.

With a potential value of as much as $12.1 billion, the initial public offering could be the biggest in the world this year and will be closely watched in a market that remains intensely nervous about the unrest in the Middle East and North Africa and the lingering debt woes of several European countries.

A surge in the price of oil and many other raw materials that has also fanned market nervousness, however, is favorable from the perspective of Glencore, whose main activity is trading metals, minerals, oil, coal and grains.

By staging a secondary listing in Hong Kong, Glencore is also hoping to tap into a marketplace that has gained huge significance in recent years.

Hong Kong now attracts a majority of global I.P.O. volumes, largely thanks to a flood of mainland Chinese companies choosing to go public.

However, non-Asian companies are also increasingly choosing to list in Hong Kong and on other exchanges in the Asia-Pacific region, in a bid to tap into a cash-rich investor base and to raise their profiles in a part of the world that is becoming increasingly important to global companies.

Prada, the Italian luxury goods company, is preparing to list in Hong Kong around the middle of the year.

Founded in 1974, Glencore is a closely held company owned by its employees and management. It also owns slightly more than a third of the global mining giant Xstrata.

‘‘An I.P.O. is the next logical step in our development and strategy,’’ Ivan Glasenberg, the chief executive, said in the statement. ‘‘It will provide us with the financial flexibility to capitalize upon long-term growth opportunities throughout our business and achieve further sustainable growth.’’

Glencore intends to use about $5 billion of the I.P.O. proceeds for capital expenditures over the next three years.

Citigroup, Credit Suisse and Morgan Stanley are the joint global coordinators for the issue.

Article source: http://feeds.nytimes.com/click.phdo?i=c5602abcdb6d5750190b5309bb56a960