Reuters reports that Qatar Holdings will seek (or is already seeking) to purchase additional shares of Xstrata if the deal with Glencore falls through. Under UK takeover rules, Glencore would not be allowed to vote its shares in the deal. Qatar is thus able to block the merger, which by statute requires approval of 75% of the disinterested shares, with only 12% of Xstrata outstanding shares (and, it seems, a little help from other shareholders). A merger partner other than Glencore could approach the company and would not face as significant of a voting hurdle, however, and Qatar apparently sees this as a legitimate concern. The SWF is looking to obtain more than 25% in order to have the ability to block other takeover attempts.
Again, I find myself wondering why the Qataris are holding so firm against this deal. I note that Qatar Holdings is not alone in its assessment that a merger with Glencore is not in Xstrata’s shareholders’ interest: Bloomberg reports that proxy advisor ISS seems to agree with the Qataris that the deal would not create a lot of value for shareholders (the deal is “marginal on economic merit”), which may explain why the Qataris have a few likeminded shareholders who are also willing to block the merger. Xstrata’s management obviously thinks it would be better off with Glencore, but I suspect the proposed £173 million in Xstrata executive retention payments may have something to do with that.