Xstrata scoffs at new Glencore offer as merger of equals becomes hostile takeover

On Friday commodities giant Glencore raised its offer minutes before a vote on its merger with diversified miner Xstrata were to take place in the Swiss village of Zug.

Following pressure from major Xstrata shareholder Qatar, Glencore upped its offer from 2.8 to 3.05 new shares for every Xstrata share it does not already own, valuing the deal at $80 billion.

Glencore already owns 34% of fellow Swiss-based Xstrata and under the new terms Glencore CEO Ivan Glasenberg (pictured right) will lead the combined company and not Xstrata CEO Mick Davis, who had all along been slated to lead a 'Glenstrata'.

Now that the deal – announced at the beginning of February as a 'merger of equals' – has turned into something more resembling a hostile takeover, Xstrata's board  appears to have decided to launch a vigourous defence of the miner, the world's number one thermal coal exporter and top 5 copper producer.

Dow Jones reports Xstrata's independent directors noted that the revised share-swap represents only a 17.6% premium to the Xstrata share price before the deal was announced and that this is "significantly lower than would be expected in a takeover."

Xstrata's board has a a point: according to studies by consultants PwC and Ernst & Young during 2011 takeover targets in the mining sector attracted an average premium of 46% – and copper producers attracted the highest valuation of all.

According to The Telegraph Xstrata's board has raised other concerns saying Glencore’s “intention to replace Mick Davis and to amend the management incentive arrangement” represented “a significant risk”.

Since the news of the bid first broke Glencore has lost 12.4% of its market value and is now worth £26 billion ($41 billion) in London. Xstrata has not fared much better – after a 3% jump on Friday its losses since February are now under 10%.