Qatar threatens to torpedo Glencore-Xstrata deal

27 Jun 2012

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Commodities giant Glencore may sweeten its $30-billion offer for diversified miner Xstrata after its second-largest shareholder threatened to oppose the deal on current terms.

Qatar Holding, the sovereign wealth fund of Qatar, which has an 11-per cent stake Xstrata, late yesterday night said that it supports the merger, but is ''seeking improved merger terms.''

Qatar Holding is seeking an exchange ratio of 3.25 a share instead of Glencore's current offer of 2.8 of its shares for each of Xstrata. It said that 3.25 a share ''would provide a more appropriate distribution of benefits of the merger.''

When the deal was announced in February, three of Xstrata's large institutional shareholders – Standard Life, Fidelity and Schroder - which together have around 3 per cent in  the company had publicly voiced their concerns and said that they would vote against the "lop-sided" deal and the retention payments offered to top Xstrata management.

Fearing that the deal would be torpedoed, Glencore today said it was considering a proposal from Xstrata to amend management incentives.

Qatar Holding has since February slowly been building its 11 per cent stake in Zug, Switzerland-based Xstrata at a cost of about $4.3 billion, and it would play a key role in the merger as the number of disgruntled institutional shareholders account for around 14 per cent.

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