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Xstrata Holders Vote for Glencore Offer Excluding Bonuses

Glencore’s $31 Billion Xstrata Takeover Approved in Final Vote
An aerial view shows the silver, lead and zinc open cut mine and operations at Xstrata Plc's Mt. Isa mine, in Mount Isa, Queensland, Australia. Photographer: Jack Atley/Bloomberg

Glencore International Plc’s $31.5 billion takeover of Xstrata Plc was approved by investors, leaving clearance by regulators in Europe and China as the remaining hurdles for the year’s biggest deal.

Xstrata shareholders today voted for Glencore’s all-stock offer while rejecting retention bonuses for about 70 Xstrata managers, the mining company said in a regulatory filing. Xstrata Chairman John Bond, earmarked for the role at the combined company, said he will resign after investors failed to heed his board’s recommendation and back the incentive payments.

Glencore Chief Executive Officer Ivan Glasenberg is creating the world’s fourth-largest mining company by adding Zug, Switzerland-based Xstrata’s coal, nickel, zinc and copper operations to his cotton-to-crude-oil commodities empire. A European Commission ruling on the deal due by Nov. 22 is unlikely to prove a stumbling block, Liberum Capital Ltd. said.

“We would be very surprised at this point if this merger is not a done deal,” Christopher LaFemina, an analyst at Jefferies Group Inc., said in a note to investors. “Kudos to Ivan Glasenberg and Glencore for navigating this entire merger process so well.”

Investors in Baar, Switzerland-based Glencore, which already owns 34 percent of Xstrata, voted 99.4 percent in favor of the deal earlier today at a meeting in Zug.

Qatar Support

Glencore sweetened its offer in September to 3.05 shares for each one in Xstrata from 2.8 to win support from Qatar Holding LLC, the nation’s sovereign wealth fund and holder of a 12 percent stake in the world’s largest exporter of power-station coal. That move gained Qatar Holding’s backing for both of two resolutions to approve the deal, while the fund abstained from a third vote on the bonuses.

Xstrata advanced 3.1 percent to 986.6 pence at the close of trading in London. Glencore rose 1.6 percent to 331.75 pence. The combined group will represent about 2.1 percent of the U.K.’s benchmark FTSE 100 Index, ranking it 13th in the gauge, according to Liberum. The ratio of Xstrata shares to those of Glencore advanced to record 2.98 times as investors bet that the deal will be completed.

Xstrata shareholders voted 67.85 percent in favor of a first resolution that included the incentive payments, falling short of the required 75 percent. A second poll in favor of the deal without incentives was agreed by 78.88 percent of shareholder votes. Holders then voted 78.43 percent to reject the bonuses.

Board Recommendation

Xstrata’s board on Oct. 1 recommended that shareholders vote for the takeover subject to approval of the retention pay, and back the bonus package. Bond, 71, will step down after the board of the combined company finds a replacement chairman “in the light of shareholders’ decision not to support the board’s recommendation,” he said in a statement today.

“This is a great deal for shareholders,” said Thomas Mitsoulis, an Xstrata shareholder who voted in Zug. “It doesn’t matter what the price is, it’s about the synergies. It’s like a marriage - you may have anxiety before the wedding, but you have to think in the long term: It’s not just about the couple, it’s about the children.”

Glencore Xstrata Plc, the new name for the company approved by shareholders today, will have interests in about 35 coal mines in Colombia, Africa and Australia, and account for about 10 percent of global seaborne exports of the fuel.

It will be the world’s third-biggest producer of mined copper, the largest zinc miner, and the biggest exporter of coal burned by power stations. The combined group will have about 11 percent of the 13 million-ton global zinc market and about 40 percent of the 1.9 million tons of the metal produced in Europe.

EU Approval

China’s Ministry of Commerce may approve the transaction in early 2013, Liberum said. European regulators will likely focus on the combined company’s influence in the zinc market, SBG Securities Ltd.’s Peter Davey said yesterday. Glencore and Xstrata have said they expect the transaction to be closed by the end of the year.

Qatar Holding is advised by Lazard & Co. Glencore is working with Citigroup Inc. and Morgan Stanley as financial advisers. Xstrata has hired Goldman Sachs Group Inc., JPMorgan Chase & Co., Deutsche Bank AG and Nomura Bank International Plc.

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