Investors fear mining giants’ Granita deal could end in tears
ADVISERS to Glencore and Xstrata were last night trying to convince investors that the proposed management team will be able to work together following the £50bn merger.
Under the terms of the proposed deal, Xstrata chief executive Mick Davis is expected to be appointed chief executive of the combined group, with Glencore’s Ivan Glasenberg set to accept being deputy chief executive.
“This arrangement is what we needed to do to get the deal done,” said one source close to Glencore.
Investors, however, most of whom have been made insiders ahead of the official announcement today, are concerned that Glasenberg will not be happy to be number two to Davis for long. They worry that the two men might have conflicting strategies and find it difficult to work together.
Glasenberg would be a major shareholder in the merged group. He has a 15 per cent stake in Glencore, which floated in London last year.
Some sources have talked about a discussion about a Granita-style agreement – dubbed such after an unenforced agreement between Tony Blair and Gordon Brown for Blair to step down at an agreed time – in which Davis might agree to step down after a short period, having received a multi-million pound
share-based retention deal.
Glencore shares fell 4.52 per cent yesterday on fears that the commodities trader might offer more than expected for miner Xstrata.
Glencore is under pressure from some Xstrata shareholders, such as Schroders’ Richard Buxton, to offer a premium higher than an expected eight per cent on Xstrata’s share price in its all share offer.
One source said: “Investors are worried about who does what and who gets what.”