Glencore merger thrown into doubt
A £42 billion tie-up that would create the world's fourth largest natural resources firm is in danger of collapse after a major investor demanded improved terms.Mining giants Glencore and Xstrata want to form a company worth 65 billion US dollars (£42 billion) but must secure the backing of 75% of shareholders in separate votes, as well as regulatory approval, to proceed. But Qatar Holdings, Xstrata's second biggest shareholder, surprised Glencore by opposing the deal and demanding a higher return for its stake.
As Glencore awaits talks with Qatar, it said it has also received a proposal from Xstrata to amend a £173 million pay deal drawn up for Xstrata boss Mick Davis if the deal proceeds, which has angered other investors.
Investment group Qatar Holding, which also owns Harrods department store and a significant stake in supermarket Sainsbury's, has demanded 3.2 of Glencore's shares in exchange for each of its Xstrata shares. This compares to Glencore's offer of 2.8 of its shares for each one of Xstrata's.
A statement from Qatar, which has an 11% stake in Xstrata, said its new terms "would provide a more appropriate distribution of benefits of the merger while properly recognising the intrinsic stand-alone value of Xstrata".
Qatar, a subsidiary of the sovereign Qatar Investment Authority, was previously thought to be in favour of the deal, which has already drawn opposition from investors including Schroders, Standard Life and Fidelity.
The rebuff will likely frustrate Glencore boss Ivan Glasenberg, who has worked on the merger for three years and now faces the prospect of sweetening the deal or walking away.
Around a quarter of Xstrata investors are against the deal - but as Glencore cannot vote with its own 34% stake in Xstrata, a no-vote from 16.75% of investors is all that is needed to block the deal.
Meanwhile, some Xstrata investors are believed to be angered by a "retention package" worth £173 million for Xstrata chief executive Mick Davis and other senior executives as part of the deal.
While Glencore would not comment on Qatar's latest move, it released a statement to confirm it has received a proposal from the board of Xstrata in relation to "certain amendments to the management incentive arrangements" proposed. Shareholder votes will be counted at meetings on July 11 for Glencore and July 12 for Xstrata.
Qatar, a subsidiary of the sovereign Qatar Investment Authority, was previously thought to be in favour of the deal, which has already drawn opposition from investors including Schroders, Standard Life and Fidelity.
The rebuff will likely frustrate Glencore boss Ivan Glasenberg, who has worked on the merger for three years and now faces the prospect of sweetening the deal or walking away.
Around a quarter of Xstrata investors are against the deal - but as Glencore cannot vote with its own 34% stake in Xstrata, a no-vote from 16.75% of investors is all that is needed to block the deal.
Meanwhile, some Xstrata investors are believed to be angered by a "retention package" worth £173 million for Xstrata chief executive Mick Davis and other senior executives as part of the deal.
While Glencore would not comment on Qatar's latest move, it released a statement to confirm it has received a proposal from the board of Xstrata in relation to "certain amendments to the management incentive arrangements" proposed. Shareholder votes will be counted at meetings on July 11 for Glencore and July 12 for Xstrata.
© 2013 Press Association