An Xstrata board that was only too happy to agree a deal earlier this year that valued each of the company’s shares at 2.8 Glencore shares has been a little hesitant about recommending an improved deal worth 3.05.
The board, which looks increasingly self-serving, is arguing that Glencore should now be paying a takeover premium since its new plans do not include keeping Davis on as chief executive for more than a few months.
Other board members do not feature too highly in the new plans either, although last night it looked as if Sir John Bond might be given the chairmanship of the new company.
Glencore says with some justification that much has changed since the original merger terms were unveiled in February.
To go any higher for Glasenberg would risk the wrath of upsetting his own shareholders, who would think he was overpaying.
The mining sector has been hammered, shareholders in Xstrata have not responded well to the management’s £200m pay scheme simply for staying on board (with no conditions attached) and Xstrata’s big spending investment plans have unnerved many.
So alarmed are some in the City that there is genuine concern about what might happen to the Xstrata share price should the current bid fail.
The respected Liberum Capital, which has the indomitable Michael Rawlinson (one of the advisers last year to Glencore’s IPO) leading its mining team, calculates that without a bid on the table, the group’s shares would be back to being worth the equivalent of two Glencore shares each, never mind 2.8.
Under these assumptions, Glencore’s new offer comes at the expected premium of around 30 per cent and should be easily high enough to be taken seriously.
The board and some investors may well oppose the new terms.
But shareholders such as the Qataris and Standard Life and others will lap it up and should do so in sufficient numbers for it to win the day.