The independent directors of Xstrata are asking for more details on the eleventh hour change to merger proposals presented to them by Glencore on Friday morning, but they do not seem very impressed with what they have seen so far.

The shareholders of Glencore and Xstrata were both set to vote on the proposed merger of the two companies on Friday, but the votes were postponed after Glencore made a last minute alteration to the merger plans.

The change was made as it became apparent that the original proposal, which involved Xstrata shareholders trading in each of their shares for 2.8 Glencore shares, was in real danger of getting the thumbs-down from shareholders.

Glencore may have upped its offer but this is no longer looking like a "merger of equals" and more like an old-fashioned takeover; one of the changes to the original deal mooted by Glencore has Glencore Chief Executive Officer, Ivan Galsenberg, assuming the same role of the combined compamy, whereas under the original terms he was to be deputy to current Xstrata CEO Mick Davis.

With a takeover comes the City concept of a "takeover premium", the price a bidder must pay to persuade owners of a company to relinquish control of a company.

"The proposed exchange ratio of 3.05 represents a premium of 17.6% to the undisturbed Xstrata share price on 1st February 2012 and 22.2% to the closing price on 6th September, which is significantly lower than would be expected in a takeover," the independent directors of Xstrata note in their letter to Glencore.

The revised Glencore proposal contains as a condition the ability for Glencore, at its sole discretion, to structure the transaction as a takeover offer, which rather gives the game away in terms of whether this is still a merger of equals. The independent directors of Xstrata note that the the current scheme of arrangement, which had been agreed to by management of both companies, gave sole discretion to Xstrata to structure the transaction as a takeover offer if it wishes.

The other thing bugging the directors at Xstrata who are not also big wheels in Glencore (a major shareholder of Xstrata( is the intention to replace Mick Davis as CEO and to amend the management incentive arrangements, as this "represents significant risk around the retention of the Xstrata senior and operational management.

Pointedly, the directors note that these senior people are intended to be responsible for around four-fifths of the combined group's earnings. The new proposal "represents a fundamental change to the governance structure which underpinned the agreed merger of equals announced on 7th February 2012," the Xstrata mavericks opined.

Shares in Xstrata were up 42.5p to 1,021.5p an hour before the close of trading on Friday. Glencore was trading 18p lower at 374.35p.

Related share prices
Xstrata (XTA) share price
Glencore Xstrata (GLEN) share price