Glencore says $30bn Xstrata deal “not a must-do” – by Clara Ferreira-Marques ( – August 21, 2012)

CEO Ivan Glasenberg said Tuesday the $30 billion bid for Xstrata is not a must-do deal, strongly suggesting it will not yield to key shareholder Qatar’s demands for an improved offer.

LONDON (Reuters)  –  Glencore’s $30 billion bid for miner Xstrata is not a “must-do deal” its chief executive said on Tuesday, in making the company’s strongest suggestion yet that it will not yield to key shareholder Qatar’s demands for an improved offer.
Ivan Glasenberg, speaking after the commodities trader 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 percent a less than 3 percent stake in Xstrata since the all-share bid was announced earlier this year, less than Glencore’s own 34 percent 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 “take 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.”
Glencore, which listed precisely to gain the firepower to do bigger deals, announced in February it would bid for the Xstrata stock it does not already own in a move to create a mining and trading powerhouse. Qatar, however, broke months of silence in June by demanding a ratio of 3.25 to back the deal.
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 on Tuesday the risk of collapse had risen.
“Our base case is still for a bump to (a share exchange ratio of) 3, but our conviction regarding a bump is weakening,” Jefferies analysts said in note.
“It is not clear to us whether Glencore is talking down the market’s expectations to soften Xstrata’s oppositional shareholders, ultimately surprising to the upside with a bump to 3, or whether Glencore is just being completely transparent about its true intentions and does not plan to bump at all.”
The market was also unclear, with Xstrata shares up by just over 1 percent at 920.1 pence at 1245 GMT and Glencore almost flat at 354.4 pence.
“Given the fact that maybe a bump from 2.8 to 3 – which is only about 7 percent – would do it, I still think that it’ll probably get done at a little bit higher,” analyst Nik Stanojevic at stockbroker Brewin Dolphin said.
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.

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