Third Xstrata shareholder opposes Glencore merger
A THIRD prominent shareholder in Xstrata has come out against the miner’s £56bn mega-merger with commodities trader Glencore.
Chad Deakins, a fund manager with RidgeWorth, a US-based investment company, told Bloomberg that the effective eight per cent premium implied in the share swap ratio for the deal significantly undervalues Xstrata.
“Xstrata is a prized asset,” he said. “To our view, they’re not offering much of a premium at all. They’re underpaying.”
Deakins’ dim view of the deal makes him the third major Xstrata shareholder to speak out against it after Schroders’ Richard Buxton and Standard Life’s Peter Cummings both voiced their opposition.
The merger requires 75 per cent approval from Xstrata’s shareholders, but because Glencore owns 34 per cent of the company already and is therefore barred from voting, opposition from just 16.5 per cent would be enough to wreck the deal.
The main issue is the premium, which investors say is not nearly enough for one of the world’s biggest coal producers.
But there are also concerns about the management make-up: if it goes ahead, the deal would see Xstrata chief executive Mick Davis take over as CEO of the combined group, with his rival at Glencore Ivan Glasenberg taking on a deputy role.
But it is not clear how long such an arrangement could last: it is understood that Glencore’s senior management see Davis’ reign as only temporary.
Buxton said: “It’s probably a great deal for the Xstrata management, but it’s a poor deal for Xstrata’s majority shareholders.”
Davis and Glasenberg now have their work cut out to convince investors to back the deal.