Xstrata Shareholders Back Glencore Merger But Reject Bonuses

on Nov 20, 2012

Switzerland-based mining giant Xstrata (LON:XTA) and Anglo-Swiss commodity trader Glencore (LON:GLEN) are now a step closer to creating one of the world’ largest natural resources companies.

Glencore’s $31 billion (£19.5 billion) takeover of Xstrata was approved by investors today, leaving clearance by regulators in Europe and China as the remaining hurdles for this year’s biggest deal.
**Merger Approved by Both Sides, But Bonuses Vetoed as “Egregious”**
During the complex series of votes in the Swiss lakeside town of Zug, Glencore’s investors overwhelmingly backed the merger earlier today, with about 99 per cent of the company’s shareholders approving the deal. A few hours later almost 79 per cent of Xstrata’s voting shareholders also gave their support for “Glenstrata”, as the merger has become popularly dubbed. Yet the miner’s shareholders voted down a controversial £140 million retention package for Xstrata’s senior executives, in a powerful snub to the company’s board, which had repeatedly urged investors to support the payouts. In the event, 78.4 per cent of Xstarta’s shareholders voted against the payments, described by one particularly critical investor, activist fund Knight Vinke, as “egregious”.

!m[](/uploads/story/861/thumbs/pic1_inline.png)At the start of the merger talks, Glencore offered 2.8 of its own shares for each of Xstrata’s, but was forced to raise that to 3.05 shares after pressure from Xstrata’s biggest independent shareholders. After a wave of uncertainty, the deal got back on track after Qatar’s sovereign wealth fund – Xstrata’s second-largest shareholder – last week said it would back the deal unreservedly. But the fund, which has played a pivotal role in the prolonged talks, added it would abstain from voting on the controversial packages proposed for Xstrata’s top management team.

**Voting Outcome Boosts Shares**
Following today’s shareholders’ approval of the deal, Xstrata advanced 2.3 per cent to 978.9 pence in London trading, while Glencore rose 0.8 per cent to 329.05 pence. Depending on the combined group’s final weighting, “Glenstrata” could be the 13th largest company in Britain’s FTSE 100, representing 2.1 per cent of the blue-chip index, Reuters reported today.


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