Glencore may abandon Xstrata bid if Qatar opposes

LONDON: Glencore International is prepared to walk away from a $30-billion deal to buy Xstrata, in what would be this year's largest takeover, rather than give in to demands from Qatar's sovereign wealth fund and "overpay" for the mining company.

"If they vote against the deal, they will block the deal," Chief Executive Officer Ivan Glasenberg said in a phone interview. "From my point of view, from Glencore's point of view so be it. It's not the end of the world. We will move on."

Glencore's planned takeover of Xstrata, set for an investor vote on September 7, has a 60% chance of being rejected, UBS said on Monday. Glasenberg, 55, has repeatedly rebuffed calls to raise the bid even as Qatar Holding boosts its stake to 12% and argues for a sweetened offer. On Tuesday, he declined to say the current bid was final.

"Glasenberg is playing a game of high-stakes poker," Rupert Nathan, head of UK fund management at Fat Prophets, said on Tuesday in an interview. "Given the way that the holdings are stacked, they either sweeten the offer or walk away."

Glencore slipped 0.4% to 352.50 pence at 10:14 am in London trading. Xstrata gained 0.2% to 909.5 pence, resulting in a ratio of 2.58 Glencore shares for each in Xstrata. That's the widest discount to the offer of 2.8 shares since it was announced on February 7, signalling a heightened risk of the bid failing, data compiled by Bloomberg show.

"I don't quite understand the Qataris' reason and logic because the Qataris have not been a big shareholder of Xstrata previously," Glasenberg said. "We can always look and if the Qataris believe they got it right, then let's talk in a year or two years' time, and we'll see who got it right."

The risk of Glencore's takeover failing has increased as Qatar's sovereign wealth fund continues to raise its holding in Zug, Switzerland-based Xstrata.

The fund has spent about $5 billion building its stake from about 3% in February. Qatar, advised by Lazard, pressed for improved terms in June, saying a bid of 3.25 shares would be "more appropriate."

"I'm not going to upset my shareholders and overpay," Glasenberg said. "We cannot say what our final offer is but you've heard my discussion and draw your own conclusions."

Glencore, the world's largest publicly-traded commodities supplier, said that first-half profit dropped 26% to $1.8 billion, beating analysts' estimates, after prices for commodities fell. It declared a dividend of 5.4 cents a share.