HomeBase MetalsGlencore cools off on Xstrata deal

Glencore cools off on Xstrata deal

An Xstrata coal
project in Queensland,
Baar, Switzerland — 22 August 2012 – International trading giant Glencore International’s US$30 billion bid for global miner Xstrata is not a “must-do deal”. its chief executive says, making the company’s strongest suggestion yet that it will not yield to key shareholder Qatar’s demands for an improved offer.

Reuters reports that Ivan Glasenberg, speaking after the commodities trader had reported a smaller than expected drop in its first-half profit, expressed exasperation with Qatar Holding, which has been in a stand-off with Glencore since the sovereign wealth fund surprised the market by demanding an improvement to Glencore’s offer of 2.8 new shares for every Xstrata share.

Qatar has increased to 12% a less than 3% stake in Xstrata since the all-share bid was announced earlier this year “’ less than Glencore’s own 34% holding, but enough to block the takeover under the current deal structure.

“We cannot understand the position of the Qataris, asking for more than the 2.8 ratio. We have seen nothing coming out of recent results that supports this. In fact we have seen quite the opposite,” Glasenberg told Reuters in an interview. “It is not a must-do deal. It is a deal that we believe makes sense.”

While Glasenberg, speaking three weeks before a Sept 7 vote, stopped short of saying he would definitely not raise the current offer, he told reporters and analysts to draw their own conclusions from his comments, adding Glencore could walk away and return to the merger proposal in a year or two.

“It is unlikely anyone else will come and buy Xstrata, so it still sits there for us to look at some time in the future,” he said. “It is not as if it is a deal we are going to lose, or that is running away from us.”

Neither Glencore nor Qatar, buying Xstrata shares almost daily, have shown any sign of blinking in the standoff. While several analysts said it was too soon to write off the merger, they also said the risk of collapse had risen.

Sources familiar with the negotiations had expected talks between Glencore and Qatar to resume after earnings and the end of Ramadan, but Glasenberg said no meeting was yet planned.

Source: Reuters Africa. For more information, click here.