Some might say that Glencore’s handling of the Xstrata merger deal over the past few months has been risky, stubborn and egotistical.

But the company, and its colourful ceo Ivan Glasenberg, might just have pulled off a masterstroke at the eleventh hour.

Until Friday morning, the firm appeared to have upset the biggest potential shareholders in a merged $80-billion mega-firm.

The most critical of these was Qatar Holdings, which went so far as to make a couple of rare public statements on the matter, one of which stated that Glencore needed to offer more of its own equity if it wanted to buy the sovereign wealth fund’s Xstrata shares. 

By upping its offer for each Xstrata share from 2.8 Glencore shares to 3.05 shares earlier on Friday September 7, the trading company and producer appears to have tipped the balance back in its favour.

And by calling for Glasenberg to run the new merged firm within six months of the deal going through – instead of Xstrata ceo Mick Davis, who was previously in line for the job – it has added a new dimension to the story of the merger.

Standard Life, a top ten shareholder in Xstrata and previously a fairly vociferous opponent to the price of the deal, has already said it supports the revised terms.

According to David Cumming, Head of Equities at Standard Life Investments, the deal will “enhance the growth prospects of the combined group”.

“Consequently, as shareholders both of Xstrata and Glencore, we are pleased with the proposed outcome,” he added.

That’s 1.42% of the shareholders opposing the previous share ratio in the bag.

If – and it’s a big if – other shareholders follow suit and back the deal, it pushes Xstrata into a tricky corner.

Refuse to accept Glasenberg as eventual ceo instead of Xstrata’s Mick Davis, and the miner will have gone against the wishes of its core investors. Accept him as ceo, and Davis waves goodbye to any chance of running the merged firm.

Glasenberg, for his part, either sees the deal fall apart for reasons that will be perceived as Xstrata’s fault, or pays a little more but gets to be head honcho.
A return to the status quo wouldn’t exactly be a problem for Glencore, unless the market advisory arrangements were forced to unravel, but that’s clearly a risk he’s willing to take and a battle he thinks he can win.

But can he? Control of Xstrata is clearly what Glasenberg has wanted all along. Shareholder opposition flushed Glencore’s ambitions out into the open.

This proposed deal looks like a takeover, which begs the question: is 3.05 enough? Can Glasenberg convince shareholders he’s the right man to run Xstrata? He’s now set a floor price on the deal, and will be forced to come clean on his intentions for the firm in detail.

Gutsy? For sure.

Genius? We’ll see.

Andrea Hotter 
ahotter@metalbulletin.com
Twitter: @andreahotter

Keep up with the latest news on the Glencore-Xstrata merger here.