Glencore-Xstrata deal meets shareholder opposition

At least two top 10 shareholders in miner Xstrata PLC plan to vote against a takeover by commodities trader Glencore International, threatening the creation of a powerhouse spanning mining, agriculture and trading.

Standard Life Investments and Schroders said on Tuesday the deal, the mining sector’s biggest, to buy the remaining 66 per cent of Xstrata for $41-billion (U.S.), undervalued their shares.

The deal, designed to create a company to rival mining heavyweights such as BHP Billiton and Rio Tinto, needs to be approved by 75 percent of shareholders excluding Glencore, which is barred from voting.

Standard Life, the fourth largest investor in Xstrata, and Schroders together own 3.6 percent of Xstrata, but 5.6 percent of the shares needed for approval, according to Thomson Reuters data. Their stand may persuade others to follow suit.

“I’m in complete agreement with Standard Life and we intend to do exactly the same. This is a fabulous deal for Glencore, it’s probably a great deal for the Xstrata management, but it’s a poor deal for Xstrata’s majority shareholders,” Schroders’ Richard Buxton told Reuters.

Miners Xstrata, Glencore agree to $90B merger

Mining company Xstrata and commodities dealer Glencore agreed to a $90 billion US merger Tuesday that will create the world's fourth largest natural resources company.

The announcement of the terms of the deal comes just a few days after the revelation that the two companies were in discussions about a long-mooted tie-up — merger discussions, codenamed "Everest," have gone on for years.

The mining giant would operate around the world, including major nickel mining and refining businesses in Canada, where Xstrata subsidiary Xstrata Nickel owns the former Falconbridge nickel company in Sudbury, Ont.

The combined company will control a chain of businesses from mining to refining, storage and shipping of basic commodities like coal, copper and corn.

Under the terms of the deal, Xstrata shareholders would receive 2.8 Glencore shares for each of their shares. That represents a premium of 15.2 per cent based on Monday's closing prices. Glencore already had a 34 per cent stake in Xstrata.

The merger is projected to yield cost savings of $500 million in the first full year, primarily in marketing, while creating the world's fourth largest global diversified natural resource company, with operations in 33 countries. It will also give the combined company greater leverage to borrow money for its operations — a key advantage in the high-volume, low-margin commodities business.