Thursday, 30 August 2012

Xstrata watch: will the proposed merger with Glencore proceed? Qatar and Norway opposed.

Regular readers of The Network will know that I keep a watching brief on Xstrata.  I do this because of connections with Mount Isa and McArthur River - both sites of mining activity by the Swiss-headquartered Xstrata in Australia.  For previous posts relating to Xstrata on this blog, please go here.

The watch on XStrata is becoming more frequent because of a proposed merger between Xstrata and Glencore which would put the merged corporation up there with the really big boys of Rio Tinto and BHP Billiton.  In the background, just to add some spice to the narrative, is the Qatar Investment Authority.  All this is covered in the blogs at the link above.  New Networkers will need to delve into these to begin to understand the whole story.

A lot of background noise goes on in Australia around Gina Rinehart and Twiggy Forest.  Understandable in the case of Rinehart, the world's richest woman, but not so much in the case of Twiggy who has quite a few shadows in his background.  Real stories will always be about the biggest and the best and the most international.  Xstrata and Glencore are both international mining corporations - in the case of Glencore, they have a wider reach and have become known as a commodities based corporation.

Merger discussions and manoeuvres have been going on - well, on and off to be precise - during 2012.  Currently, the talk is about whether a proposed decision/meeting will go ahead as proposed on September 7.  So, because there is a due date, people around the world are watching with bated breath.

Yesterday, shares tumbled in price following news that not only was Qatar opposing the merger but Norway had now enjoined the opposition. Norway's oil-based sovereign wealth fund has been in the market buying shares and, while their holding is a long way off that of the Qatar's, their stance on the merger is significant and influential.

Another influential with a negative view to the proposed merger is PIRC - the UK's leading independent research and advisory consultancy providing services to institutional investors on corporate governance and corporate social responsibility.  PIRC has outlined to investors a number of reasons why the merger should be opposed.

Meanwhile, over in Qatar they are hitching up their skirts or rolling up their sleeves - depending on your metaphorical view.  Qatar is not happy with the merger because the pay-off for them is not as good as it should and could be.  However, Qatar has provided assurances to Xstrata that, in the event the proposed merger is not given the go-ahead, then it will up its stake in Xstrata.  Between the devil and the deep blue sea?  Xstrata currently seems to lie somewhere between Glencore and Qatar.

So in all this pushing and shoving, Glencore becomes the focus of the wait and see game.  With opposition to the merger mounting, will Glencore hold its ground or will it increase its offer in some way or another?  Or will it give the Kenny Rogers response?

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