Qatar Holding is squaring up against investors over the proposed US$25 billion (Dh91.82bn) merger of Xstrata and Glencore, throwing the biggest such deal of the year so far into disarray.
Qatar's sovereign wealth fund unit is seeking to amend the terms of the so-called "merger of equals" between the two natural-resources companies to acquire more Glencore shares.
Between Qatar Holding and other institutional investments, there is now sufficient opposition among shareholders to block the deal. But that puts the Qatari fund on a collision course with Abu Dhabi's Aabar Investments and other major shareholders in Glencore.
Qatar Holding "has … informed Glencore that, whilst it sees merit in a combination of the two companies, it is seeking improved merger terms," the company said in a rare public statement.
"Qatar Holding believes that an exchange ratio of 3.25 new Glencore shares for every one existing Xstrata share would provide a more appropriate distribution of benefits of the merger whilst properly recognising the intrinsic stand-alone value of Xstrata."
The original terms proposed a ratio of 2.8 new Glencore shares for every Xstrata share held. Qatar Holding is being advised by Lazard.
Qatar's funds had been increasingly flexing their muscles since 2008, said Victoria Barbary, the managing director of the independent sovereign fund research firm Dhana Advisory.
"Qatar Holding is becoming a little bit more activist but the environment in London is such that this is becoming more common type of action for shareholders to take," she said.
Government investment funds from countries including Norway, Singapore, and Gulf Investment Corporation, a pan-GCC sovereign wealth fund, have all taken sizeable stakes in Glencore and Xstrata in anticipation of the creation of a new commodity behemoth.
A vote on the merger is due to take place among shareholders on July 11 and 12.
Announced in February, the Glencore and Xstrata merger would create a resources giant with a combined value of some $25bn but the deal has run into shareholder opposition over multimillion-dollar payouts for Glencore executives.
The company said last night it had amended those proposals in an effort to meet investor demands.
Because Glencore is a major shareholder in Xstrata, the deal only needs opposition from 16.85 per cent of Xstrata shareholders to fall apart. Xstrata is 33.6 per cent controlled by Glencore but Qatar Holding has slowly accumulated a sizeable stake in Xstrata, a mining company based in Zug, Switzerland, and now holds shares and options for 10.8 per cent of Xstrata's shares.
Glencore, on the other hand, is 1.4 per cent controlled by Abu Dhabi's Aabar Investments, which acted as a cornerstone investor in its initial public offering.
Khadem Al Qubaisi, Aabar's chairman, did not respond to calls requesting comment.
Glencore's shares fell 3.5 per cent as low as 305 pence each in London trading yesterday, while Xstrata's shares fell as much as 1.88 per cent to 771 pence.
Both are listed on the London Stock Exchange and pared early losses as the trading day progressed but they were still among the biggest losers, dragging on the gains elsewhere on the FTSE100 index in early trading.
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