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The talks between Glencore and Xstrata over their proposed $88 billion merger have escalated, with Glencore expected to pay an eight per cent premium to seal the deal.
Yesterday the Financial Times reported the higher than expected premium was a move designed to address concerns by Xstrata shareholders about a cosy deal between the CEOs of both companies.
The deal means Xstrata shareholders will receive 2.8 shares in Glencore for each share held.
The two companies have already hammered out the terms of agreement for the merger, which will combine the world’s leading trading house with one of the world’s largest miners.
The new entity would be the world’s fifth largest commodity business, behind BHP Billiton, Vale, Rio Tinto, and China’s Shenhua Energy.
According to Reuters Xstrata and Glencore have been in talks since before Christmas, and have agreed on the structure of the merger’s top management.
Xstrata is expected to take the majority of seats on the new board, keeping its chairman John Bond, CEO Mick Davis, and chief financial officer Trevor Reid.
Glencore CEO Ivan Glasenberg, who will be the new company’s largest shareholder, is expected to hold a deputy position.
According to The Financial Times unnamed sources close to the deal said while the terms of agreement could still change they were confident the merger would be accepted by shareholders.