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Glencore Xstrata: a merger of unequals

Glencore's offer for Xstrata isn't generous enough
February 8, 2012

Ever since Glencore floated last year, its 34 per cent stake in Xstrata has loomed large, and this week it revealed details of plans to merge the two businesses into a commodities powerhouse. But what the respective management teams were hoping would be a wave of acceptances may not turn out to be the formality they expected.

IC TIP: Hold at 1218p

Fund managers at Schroders and Standard Life have already declared their opposition, highlighting the fact that a 'merger of equals' that will end up with Xstrata shareholders owning 45 per cent of the combined entity, isn't very equal. "This is a fabulous deal for Glencore, it's probably a great deal for the Xstrata management, but it's a poor deal for Xstrata's majority shareholders," Schroders' Richard Buxton told Reuters. These two investors account for less than 4 per cent of Xstrata in aggregate, but their vocal opposition might be mirrored among other, more publicity-shy, investors.

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