The board of mining company Xstrata Plc is said to be close to approving Glencore International Plc’s offer, according to a source familiar with the situation. The decision on the £36 billion Glencore International Plc’s offer, which values one Xstrata Plc’s share at 3.05 Glencore’s share, is to be announced on Wednesday, September 19, as the Xstrata Plc’s board, chaired by Sir John Bond, has a meeting scheduled for the day. However one banking official stated that it was possible that Xstrata Plc would request an extension of the deadline.
The possible approval of Glencore offer on the Glencore-Xstrata merger
Xstrata held a meeting on 14th of September with non-executive directors to talk about shareholder sentiment, yet no decision was made on the Glencore International Plc’s offer. Ivan Glasenberg, chief executive at Glencore International Plc, also attended the meeting where he reassured Xstrata Plc’s senior officials that they would be allowed to run the group’s mining assets if the Glencore International Plc’s offer was accepted.
Recently Glencore International Plc’s officials highlighted that the company increased its all-share offer to save the Glencore-Xstrata merger from collapse. The Glencore International Plc’s offer has been facing the strong opposition from some of Xstrata Plc’s shareholders after Qatar Holding LLC, Xstrata Plc’s second largest shareholder with approximately 12 percent stake, had informed that would vote against the Glencore-Xstrata merger at the original 2.8 share swap ratio.
According to some banking sources, it is possible that Xstrata Plc may ask for an extension ahead of a September 24 deadline. However all signs indicate that the decision will be made this week. And, even though, Glencore International Plc is the biggest Xstrata Plc’s shareholder with a 34 percent stake, it is not able to carry its point on the Glencore-Xstrata merger without the acceptance of other shareholders including Qatar Holding LLC, which is the Xstrata Plc’s second-biggest shareholder. As it was stated by an anonymous source, the current position of Qatar Holding PLC remains unclear. The Middle East investor had previously indicated that it was insisting on the share swap ratio of 3.2 Glencore’s shares for each Xstrata Plc’s share.
Knight Vinke, the activist investor which owns as much as 0.5 percent of Xstrata Plc’s shares, has stated that it “wishes to confirm that it does not support the latest proposal submitted by Glencore for Xstrata”. According to Xstrata Plc’s shareholders, who are in strong opposition to the Glencore International Plc’s offer, the value of the company is substantially more than Glencore has already proposed.
However there are also Xstrata Plc’s shareholders, including Standard Life, who strongly believe that the current Glencore International Plc’s offer is good enough and that if the board did not agree to Glencore-Xstrata merger’s offer it would move to oust it (the board).
Tony Blair as the last resort
The Glencore International Plc’s offer on the Glencore-Xstrata merger had stalled over the price and pay terms. However Tony Blair, the former Prime Minister, takes part in the negotiation as the third party as he is retained by JP Morgan, which is currently the adviser to Xstrata Plc, mining company.
Tony Blair knows both Ivan Glasenberg, the chief executive at Glencore International Plc, and Qatari shareholders which seem to be the strongest opposition to the Glencore-Xstrata merger at the time.
Possibly the participation of Tony Blair in the talks on the Glencore International Plc’s offer could be the catalyst for talks which might be closed even this week if parties act with goodwill.