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Glasenberg rejects demands that Glencore boosts Xstrata bid


Glencore ceo Ivan Glasenberg batted aside calls for the company to boost its bid for mining company Xstrata in a conference call on Tuesday August 21.

The London-listed trading company and producer is holding firm at its merger ratio for Xstrata of 2.8 of its shares for every one of the diversified miner’s, Glasenberg said in a conference call after the company released its first-half 2012 earnings, which fell by 17% year-on-year to $3.2 billion.

Speculation had mounted that Glencore could bow to pressure from Qatar Holding, the Qatari sovereign wealth fund that holds an 11.8% stake in Xstrata, to bump the ratio up ahead of the vote by Xstrata shareholders on September 7.

But Glasenberg was adamant during the call that he could see no reason to push it up to 3.25 of its shares for every Xstrata share, as Qatar Holding had requested at the end of June.

“There was a significant premium in that 2.8 ratio already. One should not forget this was a heavily negotiated deal by Xstrata,” Glasenberg said.

“Mick Davis negotiated this deal over a long period of time. He understood the synergies involved. He and the whole management team are fully supportive of the deal.”

The board of directors at Xstrata voted unanimously in favour of the deal, Glasenberg said, and believe they have put together a solid transaction for their shareholders.

He added, furthermore, that Glencore cannot and will not pay more than is absolutely necessary for the merger with Xstrata.

“We don’t want to dilute value. A big chunk of Glencore is owned by its employees and none of our existing shareholders want us to overpay,” Glasenberg said.

Xstrata has supported the merger “to the hilt”, the Glencore ceo said, and based on the miner’s recent first half performance, the ratio remains generous.

“We think it’s a good number and the Xstrata management believe it’s a good number. We’ve not met a shareholder who’s shown us something we haven’t seen, and I don’t think they’ve shown Xstrata anything they haven’t seen,” Glasenberg said.

“We’ve got to be careful not to overpay. We think 2.8 shares is a substantial premium. What [Qatar Holding’s] angle is confuses us, but it’s not for us to speculate,” he added.

Qatar Holding edged over a 3% holding in Xstrata in February, after the announcement of the proposed merger, after which it was obligated to disclose any further share purchases in the company.

In June, it called for an increased merger ratio of 3.25 Glencore shares for every Xstrata share, which contributed to the postponement of the shareholder vote on the deal.

“The question is what are they really trying to do? None of the long-term shareholders are against the deal or even the ratio. Some have come out and said they would like more, but today, I don’t think there are many out there,” Glasenberg said.

“How [Qatar Holding] came up with 3.25 and how they can justify it, I don’t know. They only increased the stake [to 11.8%] after the announcement, which should tell you they like the deal. They’re trying to squeeze us to a better ratio, but we cannot overpay.”

The real reason behind the sovereign wealth fund’s decision to increase its stake in Xstrata to this level only after the announcement of the merger is not known, however, Glasenberg added.

“Maybe they know something Xstrata don’t. I don’t know,” he said.

Glencore’s shares were trading at 352.85 pence ($5.54) each on the London Stock Exchange as of 11.49 BST on Tuesday, relatively flat against the previous day’s closing level.

Xstrata’s shares, meanwhile, were trading at 916.2 pence each as of 11.50 BST, representing a ratio of 2.6 Glencore shares for every share in the miner.

Claire Hack
Twitter: @clairehack_mb

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