The protracted flirtation between mining giants Glencore and Xstrata appears to be nearing a conclusion. Glencore has made a final offer to Xstrata worth $36bn, or 3.05 shares for each Xstrata share, up from an initial offer of 2.8. In return for the higher price, Glencore’s chief executive Ivan Glasenberg will take over from Xstrata’s Mick Davis as head of the combined entity after six months, rather than Davis remaining in charge for longer, as originally envisaged.
What the commentators said
“Rarely has a mining merger provided so much entertainment for the casual viewer,” said Economist.com. When Glencore’s first offer came in February, combining the two companies’ mining businesses and Glencore’s commodity-trading arm seemed sensible.
But while the Xstrata board recommended the offer, it looked likely that Glencore would have to pay a bit more to placate some key investors in Xstrata who were blocking the deal. Last week, just as the offer was about to expire, former prime minister Tony Blair helped broker an agreement between Glencore and the Qatar’s sovereign-wealth fund, the main holdout.
“It shouldn’t be a difficult decision” for Xstrata’s board, said Patrick Hosking in The Times. Having recommended the cheaper merger offer earlier this year, “it would be perverse to reject the more generous one”. But Xstrata shareholders should get themselves some new directors who can keep Glasenberg “in check”, said Andrew Peaple in The Wall Street Journal.
The current board “proved unable to extract the best deal” from Glasenberg in the first place “and even now” seems mainly worried about “securing generous retention packages”.
Amid all the fuss over retention pay and the deal’s price, said Anthony Hilton in the Evening Standard, few seem to have noticed that the mining boom that has underpinned the companies’ share prices is collapsing. Supply is finally set to increase significantly and the Chinese and global economies are slowing. Why bother about the merger? “Sell them both.”