UPDATE 1-Fidelity wants better terms in Glenstrata deal

By Chris Vellacott

LONDON Feb 10 (Reuters) - Fidelity Worldwide Investment, a leading shareholder in both mining company Xstrata and Glencore has said it supports the proposed merger between the two "in principle" but wants improved terms.

"We are supporters of the deal in principle but we think the terms need to be revisited," said a source at the investment manager who said it holds a 2.3 percent stake in Glencore and 1.5 percent in Xstrata.

Glencore's proposed $41 billion takover bid for the mining group has met stiff opposition from some Xstrata investors seeking a better premium from Glencore.

After the deal was announced on Tuesday, both Standard Life Investments and Schroders, who together own 3.6 percent of Xstrata, said the deal undervalued their shares.

The deal, designed to create a company to rival mining heavyweights such as BHP Billiton and Rio Tinto, needs to be approved by 75 percent of shareholders excluding Glencore, which holds 34 percent of the miner and is barred from voting.

Under the terms, Glencore will issue 2.8 new shares for each Xstrata share in a deal it called a "merger of equals".

The ratio gives a 15.2 percent premium to Xstrata shareholders compared with its share price last Wednesday, before word leaked out about the merger talks.