The prospectus giving details of the creation of a $90 billion mining and commodities trading behemoth will find its way to the inboxes of shareholders this week.
The proposed deal between Swiss-based and London-listed Glencore International and Xstrata has been facing stiff opposition from Xstrata shareholders who accuse Ivan Glasenberg, chief of Glencore, and Xstrata CEO Mick Davis of negotiating “a cosy stitch-up” without consulting them about getting a better offer rather than a 'merger of equals.'
Glasenberg and Davis received a boost to their chances of selling the deal a fortnight ago when the oil and natural gas rich nation of Qatar said it has plans to up its stake in Xstrata to over 10%, which would make the country’s sovereign wealth fund the diversified miner’s second largest shareholder.
Glencore already owns 34% of Xstrata. Glencore is offering 2.8 shares for every one of Xstrata, but aside from second largest shareholder BlackRock, other institutional investors have threatened to block the deal.
Qatari support should provide Glasenberg and Davis the necessary backing they need to push through the deal. 75% of shareholders must vote in favour of the deal with Glencore prevented from voting.
Those holding out for a sweetener – something 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.
Even before building up Xstrata through a series of billion dollar transactions, Davis was a formidable dealmaker who with fellow South African Brian Gilbertson created Billiton. Davis left for Xstrata after Billiton was sold to BHP in 2001.
Glasenberg and Davis both cut their teeth in their native South Africa’s coal industry in the 1980s.
Glasenberg is no slouch when it comes to buying up companies either. In March Glencore snapped up Canada’s grain handler and agricultural retailer Viterra for $6 billion.
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.