Glencore boss rides to rescue of $90bn deal

Growing band of Xstrata investors plan to block mining supermerger unless offer is sweetened
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The Independent Online

Glencore boss Ivan Glasenberg will personally champion the commodity trader's proposed $90bn (£57bn) megamerger with Xstrata to disgruntled investors this week after a series of big-name funds vowed to vote down the tie-up.

On Friday, Fidelity Worldwide Investment became the fifth institutional fund to argue publicly that the current terms of the all-share "merger of equals" significantly undervalues Xstrata. Many more funds are privately opposed to the deal, which would create the world's fourth-biggest miner, leaving the vote on the deal in the balance.

Fidelity is the most important of the declared opponents as it has chunky stakes in both companies. It will not be viewed as an Xstrata investor trying to squeeze out the best terms possible. As Glencore cannot vote with its existing 34 per cent stake in Xstrata, it would only take 16.4 per cent of the remaining shareholders to vote down the merger.

Xstrata's chief executive, Mick Davis, who will also assume the top job in the widely dubbed "Glenstrata" should the deal go through, started courting investors last week.

Mr Davis would have had to have been on the roadshow anyway, as Xstrata's results came out on Tuesday, but investors have been critical that Mr Glasenberg – the billionaire who is seen as the deal's mastermind – has not made himself available to them. Jane Coffey, head of equities at Royal London Asset Management, argued last week that Mr Glasenberg's absence had "not really been helpful".

But a source close to the deal said that "Ivan's been doing business, but will be joining Mick on the road" in the next few days, as they look to convince investors that 2.8 Glencore shares for every one Xstrata share was a fair offer. That represents an 8 per cent premium for Xstrata shareholders, who are holding out for as much 20 per cent.

Xstrata is close to securing another deal, which in normal circumstances would seem more significant. The miner is close to bringing in a strategic partner for Congo's Zanaga mine, which holds a vast amount of iron ore but will need $6bn of capital expenditure. Four Chinese and three Japanese firms have bid.

Anglo American, a long-term target of Xstrata, reports its full-year results on Friday.