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Glencore/Xstrata merger falters

London, England — 28 June 2012 – The proposed US$65 billion merger between international commodities trader Glencore and global miner Xstrata is on the brink of failure after the sovereign wealth fund of Qatar – Xstrata’s second-largest shareholder – said it would oppose the terms of the deal.

Miningmx quotes “The Financial Times” as saying that the announcement by Qatar Holdings, which has an 11% stake in Xstrata, means that about a quarter of the shareholders are against the deal’s current terms – more than enough to block the merger.

Qatar said that it saw merit in a combination of the two companies, reports the newspaper, but was seeking improved merger terms. Glencore is offering 2.8 of its shares for each of the miner’s, but Qatar said an exchange ratio of 3.25 per share “would provide a more appropriate distribution of benefits of the merger”.

This move came after the merger between the world’s largest commodities trader and the blue-chip miner had already been called into doubt by protests from other shareholders over proposed
retention payments for Xstrata’s senior executives.

Analysts said the unexpected intervention from Qatar meant a change in Glencore’s terms – combined with changes to retention packages for Xstrata bosses that have angered investors – was now virtually inevitable to rescue the deal to create an integrated mining and trading powerhouse.

Glencore and Xstrata have until today to alter the terms of the deal without having to change the dates of shareholder votes, set for mid July.

Both companies have declined to comment on the Qatari announcement.

Source: Miningmx. For more information, click here.