Glencore and Xstrata Back On . . .

So reports Reuters:

 Glencore’s Chief Executive Ivan Glasenberg appeared to have broken an impasse between Xstrata’s two biggest investors – who had not talked to each other for two months – after overnight talks in London.

The meeting, attended by Glasenberg, Qatari prime minister Sheikh Hamad bin Jassim al-Thani and former British prime minister Tony Blair – who has had a role in facilitating the deal – put the takeover now worth $36 billion back on the table.

Xstrata shareholders had been due to vote on the original $34 billion bid on Friday, with a rejection widely expected. But Glencore, already Xstrata’s biggest shareholder with a 34 percent stake, then proposed the revised offer of 3.05 new shares for every share it does not already own, up from 2.8.

Qatar, Xstrata’s second largest shareholder, had demanded a ratio of 3.25 in June, though in recent days sources involved in the deal had said the Gulf state could compromise.

So it looks like Glencore needs the deal more than Glasenberg let on, and Glencore expressed its desire to push a deal through by answering a question I had been asking myself all along: why not ditch the statutory merger (as we Yanks would call it) with its 75% approval requirement, and go for a takeover?  That is just what Glencore has decided to do, but I doubt this strategy will be attractive to the Qataris who seem to be supportive of Xstrata’s CEO Mick Davis.  What does Xstrata think of the new strategy and offer?

Xstrata, in a statement, cited a letter from its independent directors to Glencore. This questioned the revised offer’s 22 percent premium to Thursday’s closing share price as “significantly lower than would be expected in a takeover”. It also criticized the intention to replace Davis and to change incentives for executives to stay with the company as a “significant risk” to its operations.

As one of Reuters’ sources put it, “This is going to get pretty dramatic, it’s gone to all-out war.”

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