The board of Xstrata is expected to back a sweetened takeover bid from Glencore International, a person briefed on the matter said on Sunday, keeping what would be one of the biggest mergers in years back on track.
Xstrata's board was set to make its announcement by Monday morning, as a regulatory deadline - already extended once - was scheduled to expire. The person briefed on the matter cautioned that some details were still being finalized, and that any agreement could still fall apart.
Should Xstrata's directors proceed with their recommendation, it would help keep afloat a merger that would create a behemoth in the world of mining and minerals. But questions about the company's restive shareholders have weighed down talks between the two sides.
First unveiled in February, the proposed transaction would unite Glencore, a giant commodities trading house, with Xstrata, its longtime mining partner. Together, the two would create an international mining c ompany with both significant physical assets and an enormous trading operation with invaluable insights into global demand for minerals.
The talks have drawn in many of London's top deal makers, generating enormous fees for the bankers involved - if the transaction is approved.
But the talks had been weighed down for months over questions about who would lead the combined company, and how much it would cost to retain key Xstrata executives.
Early in September, Glencore raised its takeover bid, offering 3.05 of its shares for each share in Xstrata. In exchange, however, the commodities trader proposed that its chief executive, Ivan Glasenberg, would take over the unified company six months after the merger was completed. Under the original terms of the deal, Xstrata's chief, Mick Davis, and his management team were set to retain control.
The changes in the new offer raised the possibility that top mining executives would depart, leaving the combined co mpany without veteran leaders in its core business. Mining is expected to comprise 84 percent of the unified company's operating profits, based on last year's earnings.
Glencore and Xstrata have since been negotiating a series of retention bonuses aimed at holding onto key executives, though those payouts - worth more than $200 million - have raised the ire of several major shareholders.
A number of institutional investors, including BlackRock and Legal & General, have been said to oppose the retention payments as too extravagant. That has prompted Xstrata to revise the bonus packages to more closely link them to performance targets, though they remain largely the same size.
Glencore and Xstrata have reportedly been working on ways to revise the shareholder voting procedures to allow investors to express disagreements over the payouts while still approving the deal.
One wild card remains the sovereign wealth fund of Qatar, the second-biggest sharehold er in Xstrata behind only Glencore, which has kept silent on the revised takeover bid. An adviser to Xstrata said previously that the country is less concerned about the payouts than about retaining key company executives.
With its 12 percent stake, Qatar Holding is seen as a key component to winning approval of any deal. The Qatar fund is expected to wait until Xstrata makes its announcement before making its own decision.
