Glencore Delays Investor Vote on $34 Billion Xstrata Deal

Glencore Adjourns Shareholder Vote on $33 Billion Xstrata Deal
Glencore International Plc adjourned its shareholder meeting to vote on its planned takeover of Xstrata Plc. Photographer: Gianluca Colla/Bloomberg

Glencore International Plc adjourned a shareholder meeting called to vote on its $34 billion offer for Xstrata Plc, raising prospects the biggest publicly traded commodities supplier will increase its bid.

The postponement followed developments overnight, Chairman Simon Murray told shareholders in Zug, Switzerland. Shares of Xstrata jumped as much as 6.3 percent while Glencore fell as investors bet that the trader will give in to investor demands to boost its offer.

Xstrata investors including Qatar Holding LLC and Knight Vinke Asset Management LLC have sought a higher bid and last month said they would vote against Glencore Chief Executive Ivan Glasenberg’s current offer of 2.8 shares. In bidding for Xstrata, the largest exporter of power-station coal, Glasenberg is seeking to complete a five-year plan to create the world’s fourth-biggest mining company.

“The market has assumed that the terms of the offer from Glencore could change, so the market has pushed Glencore down and Xstrata up,” Peter Davey, head of metals and mining research at Standard Bank Group Ltd. in London, told Bloomberg Television in an interview. “Is he going to do an 11th-hour or 13th-hour change of terms? Will he come in with a slam-dunk offer and come in over three” shares for each in Xstrata?

Xstrata gained 4.5 percent to 1,023 pence at 9 a.m. in London after falling 6 percent earlier. Glencore dropped 2.9 percent to 381.05 pence after earlier falling as much as 7 percent. It requested that trading in its shares be halted. Xstrata stock traded at 2.69 times that of Glencore, up from a ratio of 2.5 yesterday.

Discount Narrows

The discount at which Xstrata trades below the bid tumbled to as little as 2.1 percent from yesterday’s close of 10.9 percent, indicating traders are betting it’s more likely the deal is completed. The difference to the offer terms hasn’t been that narrow since May 10.

“Glencore is considering its options and will update the market in due course,” the Baar, Switzerland-based company said in a statement after the adjournment.

It’s the second time Glencore’s meeting has been rescheduled after Qatar Holding surprised analysts and investors in June by calling for a higher offer. Xstrata CEO Mick Davis had encouraged Glencore and Qatar Holding to reach a resolution ahead of the vote, according to people familiar with the situation.

Ivan Glasenberg

Qatar Holding, controlled by the Persian Gulf state’s royal family and the owner of 12 percent of Xstrata, has said it will block the 21.2 billion-pound deal. The fund has called for Glencore’s offer of 2.8 shares for each Xstrata share to be raised to 3.25. Glasenberg has said he doesn’t understand the fund’s position and has rejected calls from Qatar and other investors to raise the bid.

Murray apologized to Glencore shareholders as they approved the adjournment by a show of hands. “I’m afraid that I have to tell you that there has been an adjournment because of developments, very recent developments overnight,” he said. “We’ve been unable to give you warning. My apologies again for bringing you here under what would be almost false pretenses.”

Xstrata investors are due to meet at 10 a.m. London time at the Theatre-Casino in Zug where the company is based. A 75 percent acceptance level is needed for the takeover to proceed. A spokesman for Glencore declined to comment further.

“Investors should not underestimate Glencore’s ability to engineer a bump in the agreed ratio to three shares or the possibility of a last-minute deal with Qatar,” Alain William, a Paris-based analyst at Societe Generale SA, said in a note yesterday.

Blocking Vote

Votes from as little as 16.48 percent of Xstrata’s shares would be sufficient to block the deal because Glencore can’t vote its 34 percent stake under the terms of the deal, which was announced in February.

Xstrata is being advised by Goldman Sachs Group Inc., JPMorgan Chase & Co., Deutsche Bank AG and Nomura Bank International Plc. Glencore, which has agreed to pay Xstrata a so-called break fee of 298 million pounds should it withdraw the offer, has tapped Citigroup Inc. and Morgan Stanley. Qatar Holding has been advised by Lazard Ltd.

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