HONG KONG/MOSCOW Trader Glencore (0805.HK) (GLEN.L) has revised down its plan to boost its majority stake in Kazakh zinc producer Kazzinc, targeting an increase to just under 70 percent in a deal that will involve less cash than the original agreement a year ago.
The move, at a time when Glencore is in its final stage of efforts to take over miner Xstrata XTA.L, could reassure credit ratings agencies which had pointed to the Kazzinc deal as one where Glencore, with a rating of two notches above junk, could cut back on cash strain.
In a statement released overnight, which prompted a halt in trading of Glencore's Hong Kong shares, the trader said it had agreed to lift its 50.7 percent stake in Kazzinc to 69.61 percent for up to $1.4 billion in shares and cash. The deal will include at least 176 million shares, to be issued to the seller, Verny Capital.
At the time of its initial public offering in May last year, Glencore had said it was targeting an increase to 93 percent for a total of $3.2 billion, including $2.2 billion in cash and $1 billion in new shares.
Glencore had said in August it was reviewing the structure of the Kazzinc deal, in part, analysts have said, because a spin-off of the subsidiary's gold assets is unlikely in the current environment. The deal should complete this year.
Glencore is in the final stage of its long-awaited deal to buy the shares in miner Xstrata it does not already own. Britain's takeover regulator has given Xstrata until Oct 1 to decide whether to accept a revised offer from Glencore.
Glencore, already Xstrata's biggest shareholder, raised its offer to 3.05 shares for every Xstrata share held from a previous offer of 2.8 shares, in a last-ditch attempt to rescue the deal after Xstrata's second-biggest investor, Qatar Holding, demanded improved terms in June.
While improving the offer, Glencore also tweaked the terms of the deal, allowing Glencore's chief executive Ivan Glasenberg to take over the helm of the combined business from Xstrata chief Mick Davis within six months.