The $65 billion merger – before the recent slide in resource stocks the deal was valued at closer to $90 billion – between Glencore International and Xstrata was last night "on the verge of collapse" after Qatar, which has been furiously buying up shares in Xstrata, withdrew its support.
The sovereign wealth fund of the gas-rich Middle East nation is the second largest shareholder with more than a 10% stake in the diversified coal and copper miner.
The Financial Times reports the Qatari fund is in principle in favour of a tie-up of the Swiss commodities trader and Xstrata but wants a better deal.
London-listed Glencore already owns 34% of Xstrata and is offering 2.8 shares for every one of Xstrata.
Glencore cannot vote and Qatar's about-turn means that more than 25% of shareholders eligible to vote at the 12 July meeting are now against the deal’s current terms. Aside from second largest shareholder BlackRock, other institutional investors have all threatened to block the deal.
Apart from arguing against 'a merger of equals' Xstrata's large shareholders also bristle against the largesse being shown to Mick Davis, Xstrata CEO, who would be receiving a compensation package worth $44 million for just staying on regardless of the performance of the company. In all $265 million will be doled out to senior management at the miner to stop them from jumping ship.
Those holding out for a sweetener – something Glencore CEO Ivan Glasenberg has repeatedly rejected – point to the fact that growth prospects for Xstrata is much healthier than Glencore.
Xstrata is the world’s biggest exporter of thermal coal and the fourth-largest copper producer and in the decade under Davis has gone from having a fewer than 2,500 employees to a workforce exceeding 70,000 in 20 countries.
A combined Xstrata and Glencore would have revenues in excess of $100 billion with as much as 80% of sales earned from mining. A Glenstrata, as it has been dubbed, would become the 4th largest miner on the planet.
Apart from shareholders blocking a deal the European Union is stepping up scrutiny of the mooted merger after steelmakers and other European players "raised fears that the deal could create too powerful a player" in the market for zinc, nickel and coal.