Vukosi Fungeni

Glencore, Xstrata Merger on the Rocks (GLCNF, XSRAY, BHP, VALE, RIO)

In Financial Management on June 28, 2012 at 20:38

24/7 Wall St.

The announcement last February that Glencore International AG (OTC: GLCNF) would acquire mining giant Xstrata plc (OTC: XSRAY) has always faced one very big problem: just 17% of Xstrata shareholders voting against the deal can kill it. Glencore, which already owns 34% of Xstrata, cannot vote in the deal that has recently been pegged at a value of $58 billion. Some earlier estimates of the deal’s value ran as high as $90 billion.

Whatever. The latest threat to the merger is a demand from Qatar Holdings — the sovereign wealth fund that owns 11% of Xstrata — that Glencore boost its offer by 16%, from 2.8 shares to 3.25 shares of Glencore stock for every share of Xstrata.

Qatar Holdings’ demand follows a dispute over a retention package for Xstrata’s senior managers worth about $270 million. The total payout to Xstrata employees would be around $337 million. Originally to be…

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