Commodities trader Glencore will on Monday address the market for the first time since it agreed to buy rival Xstrata, but those hoping for a sweetener alongside its full 2011 earnings are likely to be disappointed.
Glencore, the world's largest diversified commodities trader, released headline numbers last month with news of the planned $90 billion merger, announcing a marginally higher 2011 profit, despite a trading performance battered by cotton losses.
Focus, therefore, is likely to be on the deal, as Glencore presses home the merits of a merger and its own low-capital- intensity growth profile -- a relative rarity among diversified miners as costs at major projects escalate -- ahead of a concerted campaign of investor meetings to promote the takeover.
But there is little hope of improved deal terms, analysts say, with a shareholder vote still months away.
Key Xstrata shareholders have said they support the merger in principle but not at current levels, asking the trader to improve the terms of what would be the largest mining deal since Rio Tinto's 2007 purchase of Alcan.
Glencore is offering 2.8 new shares for every Xstrata share held, a bid currently worth roughly $37 billion, excluding the 34 percent share Glencore already owns.
(Glencore) are going to try to make the case that the 2.8 ratio will be enough. They don't have to have a shareholder vote until May ... so at this early stage, publicly making an offer that is higher? Strategically there would be no point, analyst Nik Stanojevic at investment manager Brewin Dolphin said, adding he expected a deal to eventually be done at a ratio closer to 3.
They will be focusing on why the merger makes sense.
Shareholders including Standard Life and Fidelity have said they want a fresh offer.
Beyond the merger, analysts said they would be looking for detail on the performance of Glencore's divisions and on its outlook for key businesses -- particularly marketing.
Glencore said in February's announcement, when it detailed estimated earnings, that 2011 net income rose 7 percent to just over $4 billion, while revenue rose 28 percent.
Operating profit in the industrial side, which includes Glencore's production assets, climbed 18 percent, while operating profit on the marketing side dropped over 18 percent -- largely due to cotton losses.
Glencore was hit along with the rest of the cotton industry by rollercoaster conditions which saw sky-high prices in the spring followed by consumers pulling back and prices tumbling.
(Editing by David Holmes)