Market Report: 'Glenstrata' partners slip amid tie-up uncertainties


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The Independent Online

The merger may have hit a mini speed bump, but many in the City are still enthusiastic over "Glenstrata". Yet, while investors were being told yesterday that they will have to wait an extra month before getting documents relating to theproposed tie-up between Glencore and Xstrata, speculation was doing therounds suggesting that the former may have to alter its approach in order to seal the deal.

With many calling for Glencore to increase its offer of 2.8 shares for every one of Xstrata's, Jefferies' analysts were pondering the possibility of the commodities trading giant changing tack.

The current offer has been made through a "scheme of arrangement", which requires three-quarters of Xstrata's shareholders to accept the terms on the table, but the broker's scribes pointed out that if the structure was changed to a takeover offer, only half of investors would need to be convinced.

One downside of this, they conceded, is that it would be likely to leave the miner with a large number of minority shareholders, meaning Glencore would not have total control. As a result, a "scheme of arrangement would be ideal," said the scribblers, although they believe this will not be successful "unless Glencore bumps its offer ... to at least 3 shares".

Still, they were certainly keen on the tie-up generally, saying it would result in a company "uniquely competitively positioned within the UK mining sector".

However, this did not stop the two finishing in the red as the general market suffered a late slump, with Xstrata sliding 3p to 1,102.5p while Glencore dropped 5.1p to 399.8p.

Traders were not too concerned over the companies' announcement that because they want to extend talks with the European Commission over the deal, documentation which was expected to go out to investors this month will now not be received until May, claiming such delays were expected by many.

Having rallied during the last two sessions, the FTSE 100 was heading back down, shifting 58.67 points lower to 5,651.79. Overnight GDP figures from China (which, contrary to rumours during the build-up, turned out to be worse than expected) did not help, while neither did poor consumer confidence data from the US.

The financial stocks were suffering the worst of the sell-off amid yet more eurozone concerns. With Spanish and Italian government bond yields rising, Barclays and Lloyds Banking Group were driven back 8.55p to 214.9p and 1.16p to 30.76p respectively.

Another deep in the red was Sage, which slipped 7.8p to 287.7p after Jefferies' scribes said they were no longer buyers of the software company.

Sentiment around the global IT sector was also knocked by the Indian techgiant Infosys announcing revenue growth expectations lower than analyst forecasts.

Ahead of the start on Monday of the Government's public consultation on whether cigarettes should be sold without branding, Panmure Gordon was pointing towards Australia, where plain packaging legislation will be the subject of a High Court hearing over whether it violates the country's constitution.

Saying a decision should be reached by next Thursday at the latest and that it was "too close to call either way", the broker's scribblers argued the result would "be a key factor in the UK's consultation process". Although they went on to add that they remained buyers of both Imperial Tobacco and British American Tobacco, the blue-chip cigarette makers were still out of puff, with the former left 43p weaker at 2,457p and the latter retreating 27p to 3,129.5p.

Having jumped nearly 8 per cent on Thursday thanks to rising takeover hopes ahead of next week's deadline for Vodafone (0.45p lower at 169.45p) and India's Tata to decide whether to make a bid, Cable & Wireless Worldwide advanced another1.74p to 37.2p.

At the other end of the FTSE 250, Avocet Mining was 10.7p worse off at 162.8p after the gold digger announced that a study of its mine in Burkina Faso showed a new process plant was needed.

Meanwhile, former Comet-owner Kesa dipped 3.2p to 61.95p as dealers cited fears over the state of the electronics market, highlighting Sony's announcement earlier in the week that the Japanese giant expected to post a record annual loss.

Down on Aim, broker Merchant House's admission that it had still not received £150,000 of the £761,500 it raised through a share placing in February prompted the tiddler down 14.29 per cent to 0.04p.

Elsewhere, Harvard International shot up 11p to 44p after the consumer electronics group announced that it had agreed to be bought by Hong Kong's Geeya Technology in a deal worth 45p a share.