Glencore takeover of Xstrata may take longer

Xstrata will this week set a fresh date for investors to vote on Glencore’s proposed $26bn takeover offer – probably in September to allow for the European summer break, the Olympics in London and half-year results from both the miner and the trader, said sources familiar with the matter.

Xstrata shareholders had been due to meet this Thursday, but the miner was forced to delay the vote late last month after adjusting retention packages for its executives in response to shareholder outcry over mostly cash deals.

The new vote date, likely to be at least 24 days after supplementary documents are published this week, is still moveable. But sources familiar with the matter and analysts agree it will mark a deadline of sorts and certainly a goal for negotiations between Xstrata’s top shareholder Glencore, and Qatar, which is demanding an improved offer from the trader.

Talks between Glencore and Qatar – which has built up an 11 percent stake in Xstrata and carved out a role as kingmaker in the long-awaited merger – have made little or no progress over the last two weeks, with both sides indicating they are sticking to their guns.

Qatar said last week it was firm in its demand for Glencore to improve its offer to 3.25 new Glencore shares for every Xstrata share held, up from the current 2.8 ratio.

But the sources and analysts said neither Glencore nor Qatar were likely to yield until obliged.

“The Glencore guys are traders, they have a trading mentality, so they will not move before they have to,” one source familiar with the matter said. “That means they could leave any change in the ratio until 14 days before the new (shareholder meeting).”

After the 14-day mark, a deadline set by regulators, Glencore can still improve its offer ratio, but the shareholder vote would potentially have to be pushed back again.

The Qataris also have little incentive to move for now. The source said: “They are long-term investors, they can raise their stake and other powerful shareholders may align behind them.”

Activist investor Knight Vinke, a top-20 shareholder in Xstrata, last week publicly backed Qatar.

Both sides are also expected to wait for earnings statements for the first six months of the year, due for both Glencore and Xstrata in August, before making a move.

A strong performance by Glencore’s trading business could support its ratio proposal, as would a weak performance or poor outlook from Xstrata, though a drop in thermal coal prices is unlikely to have fed through yet.