Glencore CEO Ivan Glasenberg is set to stick to the commodities trader's $30 billion offer for fellow Swiss-based resource company Xstrata when it reports first-half profits of between $2 billion – $2.4 billion on Tuesday.
London-listed Glencore already owns 34% of Xstrata and is offering 2.8 shares for every one of Xstrata.
The Telegraph reports given that the current implied value of the takeover is at 2.66 times, Glasenberg "is believed to be unlikely to say anything publicly on the merger ratio when he unveils the results":
Xstrata’s recent half-year results showed a slump in pre-tax profits to $1.53bn in the six months to June, from $4.1bn in the same period a year earlier. The fall was in part blamed on a slowdown in Chinese demand.
Mr Glasenberg’s determination to continue with the offer as originally planned comes amid growing signs that Xstrata is more confident of its position on a stand-alone basis. One source indicated that as a result of the 11.5pc stake Qatar Holding has built up in Xstrata, it seems more likely that chief executive Mick Davis would keep his job were the bid to fail.
The deal – billed as a 'merger of equals' – was pushed to the verge of collapse last month when Qatar through its sovereign wealth funds unexpectedly opposed the deal's terms. Qatar's sovereign wealth fund and other institutional shareholders who want a ratio of at least 3:1 have enough votes to block the deal.
Glencore, following an 'emergency meeting' with the gas-rich Middle Eastern nation's representative declared that it is willing to kill the merger because a deal at a 3.25 ratio overvalues the miner.
The Globe & Mail reports Glencore and Qatar have now been negotiating for almost two months, "but sources familiar with the deal say there is little sign of either side blinking yet":
Talks are expected to resume in earnest after the end of Ramadan this weekend and Glencore earnings, as the countdown begins to shareholder votes on Sept. 7.
Since the news of the bid first broke at the beginning of February, Glencore has lost 27% of its market value and is now worth $38 billion in London. Xstrata has not fared any better and is worth $44 billion on the London Stock Exchange.
With revenues in excess of $200 billion Glenstrata, as it has been dubbed, would become the 4th largest miner on the planet with Xstrata's current management responsible for over 80% of the combined group's earnings, 150 mining and metallurgical assets and 20 major growth projects.