Diversified resources group Xstrata has agreed to a revised US$33 billion offer from UK commodities trader Glencore for what the parties have dubbed an all-share merger of equals.
Announcing on Monday that they had reached agreement on the final terms of the revised offer‚ the parties said the strategic rationale for a merger remained compelling and that the deal had the potential to create superior value for Xstrata shareholders.
The accepted increased merger ratio of 3.05 new Glencore shares for every Xstrata share represents a 17.6 percent premium over the ratio of 2.59 implied by undisturbed closing share prices on 1 February 2012‚ and is 25.5 percent higher than the ratio of 2.43‚ being the average of the ratios implied by the middle market closing share prices of the two companies between 3 September 2012 and 6 September 2012‚ the latter being the last business day prior to the announcement by Xstrata of the revised proposal from Glencore.
Glencore originally offered 2.8 new Glencore shares for every Xstrata share.
In terms of the revised offer‚ the original board structure remains unchanged‚ except that Xstrata CEO Mick Davis‚ a South African‚ will become CEO of the combined group for a period of six months from the effective date. Upon his departure‚ Glencore CEO Ivan Glasenberg‚ also originally from South Africa‚ will become CEO of the combined group.
A current Xstrata Group operational executive will replace Davis upon his departure as an executive director of the board of the combined entity‚ to preserve the majority of Xstrata directors on the board.
“The Independent Xstrata Non-Executive Directors continue to believe the proposed exchange ratio‚ governance structure and the retention of key Xstrata managers through the Revised Management Incentive Arrangements are essential elements of the Merger‚” Xstrata said in a statement.
The merger will be implemented via a Court-sanctioned scheme of arrangement to safeguard the requirement that a significant majority of Xstrata shareholders approve the merger and to ensure a binary outcome.
In response to Xstrata shareholder feedback‚ the independent Xstrata non-executive directors have determined that the new scheme will no longer be conditional on the approval of the Revised Management Incentive Arrangements‚ meaning that the merger could proceed even if the Revised Management Incentive Arrangements are not approved.
Article continues on pages two and three: commenting on the deal...