Zug, Switzerland — 14 September 2012 – The Board of global miner Xstrata’s is expected to recommend international trader Glencore’s revised US$34 billion bid as early as next week, sources close to the deal say, although it may come with some qualification surrounding such issues as staff retention.
Glencore, already Xstrata’s biggest shareholder with a 34% stake, made its original recommended all-share offer in February but hit trouble in June when the company’s second-biggest investor Qatar Holding demanded an improved deal, Reuters reports.
Detailing the new offer, Glencore said Xstrata shareholders would now get 3.05 shares for every Xstrata share held, instead of the previous offer of 2.8 shares. However, under the new proposal its own chief executive, Ivan Glasenberg, is to take over the helm of the combined business from Xstrata’s chief executive Mick Davis, who would have stayed for at least three years under the original deal.
Instead, Davis, who has led Xstrata for over a decade, will leave within six months.
“We all agree that 3.05 is better, and that if you were happy with 2.8, you should be happy with 3.05,” one source involved in the deal said.
“But it is all work in progress. There are a lot of people saying this is a slam dunk, but the board has a duty … to ensure they are comfortable they have the right to retain key operational personnel.”
It was not clear what changes the Xstrata board could request or demand, but one of the sources said the board could seek guarantees from Glencore for managers it sees as key: “It will take more than just reassurance.”
A separate source said any changes were likely to come in Xstrata’s controversial retention package for more than 70 key executives, though others said that was not likely to change.
Operational and management issues are key for Xstrata and at the forefront of concerns for the board, several of the sources said, as the miner shifts from an acquisition-fuelled first decade into a phase of organic growth which the miner hopes will boost volumes by 50% by the end of 2014 and cut costs.
Xstrata’s board has until Sept. 24 to decide whether or not to recommend the revised offer.
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