Xstrata (ISE: XTA.L) advanced 34 pence, or 3%, to 1,047 pence in early trade this morning after Glencore (ISE: GLEN.L) confirmed it had raised its offer for the miner to 3.05 shares. Glencore's shares fell 3 pence, or 1%, to 374 pence this morning, thereby valuing Xstrata at 1,141 pence per share, or £34 billion. Glencore currently owns 34% of Xstrata.
Today's statement followed news late on Friday that Glencore had sent a revised offer to Xstrata. Glencore had initially proposed buying Xstrata for 2.8 Glencore shares earlier this year, but major investors questioned the valuation of the deal and ultimately caused Friday's shareholder meeting to agree the proposal to be adjourned.
Indeed, Xstrata said on Friday that the new proposed exchange ratio of 3.05 represented a premium of 17.6% to the "undisturbed" Xstrata share price on Feb. 1 and 22.2% to the closing price on Sept. 6, which was "significantly lower than would be expected in a takeover."
In addition, Xstrata said on Friday that "the intention to replace Mick Davis as chief executive officer and to amend the management incentive arrangements represents significant risk around the retention of the Xstrata senior and operational management intended to be responsible for approximately 80% of the combined group's earnings and represents a fundamental change to the governance structure which underpinned the agreed merger of equals announced on 7 February".
In response, Glencore said today that the offer represented a 27% premium for Xstrata shareholders and that it would not increase the 3.05 merger ratio any further.
In addition, Glencore said Mick Davis would become the chief exec of the combined group for the first six months, with Glencore's boss, Ivan Glasenberg, becoming chief exec thereafter.
Xstrata in turn confirmed it would respond in full to Glencore's offer by Monday, Sept. 24.
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