San Francisco Chronicle
Romney, Obama step it up in crucial Ohio
San Francisco Chronicle
Westerville, Ohio — Republican presidential candidate Mitt Romney barnstormed Ohio on Wednesday amid signs that the battleground state, and perhaps others, is slipping farther from his grasp. With President Obama also campaigning in the state, …
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A 10% stake would have been sufficient as a blocker to Ivan Glasenberg’s merger pitch – so why buy 12%?
The sovereign wealth fund has gobbled 12% of the miner, which represents overkill in terms of firepower to thwart Glencore’s proposed all-share scheme of arrangement. Given the presence of other declared opponents to Ivan Glasenberg’s merger pitch of 2.8 Glencore shares for every Xstrata share, a stake of 10% or so would have been sufficient as a “blocker”.
But the Qataris don’t seem to be satisfied at 12%. What if they go as high as 20% over the next year, building a counterweight to Glencore’s 35% holding? At that point, Xstrata would be a strange stock market beast – there aren’t many large FTSE 100 companies where two investors own half the shares between them.
In terms of day-to-day management of the mines, such an arrangement may make little difference. Xstrata chief executive Mick Davis is used to working in the shadow of one big investor and two should feel much the same. But, if the Qataris do assemble 20%, would they want representation on the Xstrata board? Glencore is entitled to appoint three directors today. Would Qatar be allowed two?
That’s one possible uncomfortable reality Glasenberg might have to confront if his current proposal is shot down when Xstrata shareholders vote on it on Friday. He’s used to having an effective veto over Xstrata’s strategy and capital expenditure budgets. In future, he could be one of two parties in that position. He surely cannot have imagined such an outcome when he launched the merger proposal in January.
It’s not too late, of course, to avoid it – he simply has to improve the offer this week to meet Qatar’s idea of a fair price. But, if he doesn’t, it is hard to see how this deal can ever come back on today’s terms – ie terms that Glasenberg says he regards as fair.
It’s still odds against Glencore making an improved offer at the 11th hour, which is why the share ratio in the market is less than 2.5 times. But the temptation to try, say, three times must be acute. The Qataris, with a literal sense of what long-term investment means, sound like a trader’s nightmare.
Category : Stocks