Swiss miner Xstrata finds Glencore's new offer too low

In a last minute attempt to save the $90-bn merger deal with Swiss diversified miner Xstrata Plc, global commodities giant Glencore International Plc has upped the ante as Xstrata's second largest shareholder Qatar Holdings LLC opposed the original offer and the deal was on the verge of a collapse.

In its new proposal, Glencore offered $36 billion for Xstrata or an exchange ratio of 3.05 shares of Glencore for every share of Xstrata against the original 2.8 shares. Qatar Holdings, the gulf nation's sovereign wealth fund, which holds a 12-per cent stake in the miner, had demanded an exchange ratio of 3.25 for proceeding with the deal.

In a statement Xstrata said: ''The proposed exchange ratio of 3.05 represents a premium of 17.6 per cent to the undisturbed Xstrata share price on 1 February 2012 and 22.2 per cent to the closing price on 6 September, which is significantly lower than would be expected in a takeover.''

Under the new offer, Glencore, which holds 34-per cent stake in Xstrata, will have discretion to structure the transaction as a takeover offer in place of the present recommended scheme where that discretion currently lies with Xstrata.  

Moreover, Glencore is set to replace Xstrata's current CEO Mick Davis with Ivan Glasenberg, Glencore's CEO who would become the CEO of the combined entity, .

Glencore intends to amend the management incentive arrangements, which Xstrata considers a risky move and represents a fundamental change to the agreed governance structure under the 'merger of equals' scheme announced in February.