Xstrata shareholders will take advantage of a technicality in the takeover process to seal better terms in its "merger of equals" with Glencore, a deal that would create a £50bn mining giant.
The merger talks became public on Thursday, after years of speculation and tentative contacts to reunite the commodities trader Glencore with Xstrata, one of the FTSE's most acquisitive companies. Xstrata spun-out of Glencore as a collection of coal assets 11 years ago, but has expanded into zinc, copper and nickel and is now a similar size to its former parent.
Glencore retained a 34 per cent stake in Xstrata, which should have made the all-share, nil premium offer easier to push through. However, the offer has been made through a "scheme of arrangement", which saves on stamp duty but means that Glencore is precluded from voting its shareholding.
That also means 50 out of the remaining 66 per cent of Xstrata shares will have to vote in favour of a merger. A growing number of Xstrata shareholders, including Schroders' head of UK equities Richard Buxton this weekend, say that they will vote against the deal unless they are given more stock in the combined group than has already been proposed.
"There's no way this will go through unless Glencore offers a premium," said one fund manager with an Xstrata holding. "Mick Davis [Xstrata CEO] has always told us a merger with Glencore would have to involve a premium."
Mr Davis and Ivan Glasenberg, Glencore's boss, are thrashing out key details of the merger, including the board structure. Mr Davis is expected to become chief executive, in at least the short-term, with Mr Glasenberg to take over at a later date.
Sources close to the negotiations believe that the deal could take around four months to finalise, though the full structure of the merger could be disclosed later this week.