By Javier Blas in Dubai and Sylvia Pfeifer, Anousha Sakoui

and Jack Farchy in London

Glencore is set to pay a larger premium than expected to seal its long-coveted merger with Xstrata, a move designed to defuse concerns among Xstrata investors about a cosy deal between the chief executives of the

two companies.

Over the weekend they hammered out the terms of an agreement on an $88bn merger that would combine the world?s leading trading house with one of the biggest mining groups.

Under the agreement, which was still being finalised last night and is likely to be announced along with Xstrata?s annual results tomorrow, investors in the miner would receive 2.8 Glencore shares for every Xstrata share they hold.

That ratio puts a greater relative value on Xstrata shares than most analysts or investors had anticipated.

On Friday, the ratio between the two companies? share prices closed at 2.66. This represents an 8 per cent premium over Xstrata?s closing share price

on Wednesday.

Three-quarters of Xstrata?s shareholders would have to approve the deal – with Glencore?s 34 per cent holding unable to vote – meaning that only 16.4 per cent of Xstrata?s shareholders can block it.

Nonetheless, people involved in the discussions are confident of broad-based acceptance from shareholders.

Ivan Glasenberg and Mick Davis, chief executives of Glencore and Xstrata respectively, have also agreed the make-up of the combined company?s board and senior management.

Sir John Bond, Xstrata?s chairman, will stay on as chairman of the enlarged group, while Tony Hayward, the former chief executive of BP, will be the senior independent director, according to people familiar with the negotiations. Trevor Reid of Xstrata is likely to be chief financial officer, with Mr Davis becoming the chief executive and Mr Glasenberg deputy chief executive.

The people warned, however, that these terms could change.

The agreement comes after some Xstrata shareholders called for a larger premium to compensate for ceding control of their company.

Glencore?s shareholders would own 56 per cent of the combined group, with Mr Glasenberg becoming the largest shareholder with a 9 per cent stake.

? The Financial Times Limited 2012