Xstrata-Glencore merger to be decided Sep 7

Giant miner Xstrata (LON:XTA) has set Sep. 7 as the day for its shareholders to vote on the $26 billion takeover by Glencore (LON:GLEN), giving the commodities trader and contender investor Qatar Holding about six weeks to reach an agreement on the offer conditions.

The vote, originally scheduled for July 12, was postponed after shareholder objections drove Xstrata to better the retention packages for its top managers. Investors had protested the overblown deals, especially those not related to executives’ performance, threatening to thwart the Xstrata-Glencore merger.

Even the Association of British Insurers (ABI), which represents around a fifth of investments on the London Stock Exchange, issued last month a so-called “red-top alert” on the retention plans.  The unusual alert, considered the ABI’s most serious warning, indicates a breach in corporate governance.

According to sources quoted by The Globe and Mail, while the September date could still be moved, it marks “a deadline of sorts and a goal for the talks between Glencore and Qatar, which owns 11% of the miner.”

Xstrata’s announcement comes a week after the Australian Competition and Consumer Commission (ACCC) decide to approve the merger, causing unions to protest.

The CFMEU, an Australian union representing construction, forestry, mining and energy industries, immediately voiced its concern over the deal, attacking the ACCC for approving it.

The union, said VP Wayne McAndrew in an e-mailed statement, holds “grave fears” over the proposed merger.

“Xstrata and Glencore are already too powerful in global resources, especially given their poor track record. Further concentrating power in the hands of those known for their propensity to exploit workers and bully governments will only lead to further abuses,” said McAndrew.

The mining giants are spending a combined $200 million on advisers and legal counsel to push the deal through and a collapse would be a blow to a long list of bankers, including: Citigroup, Morgan Stanley, JP Morgan and Deutsche Bank.

Apart from shareholders blocking the deal, the European Union is stepping up scrutiny of the mooted merger after steelmakers and other European players “raised fears that the deal could create too powerful a player” in the market for zinc, nickel and coal.

Xstrata said it expects formal notification of the transaction from the European Commission to take place in mid to late August.

With revenues in excess of $200 billion Glenstrata, as it has been dubbed, would become the 4th largest miner on the planet with Xstrata’s current management responsible for over 80% of the combined group’s earnings, 150 mining and metallurgical assets.

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