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Dubai - Qatar Holding’s shock rebuff of Glencore’s offer in
its $30bn takeover bid for miner Xstrata indicates a new, muscular stance by
the sovereign fund which had long been content to be the quiet investor in its
big-name portfolio.
Late on Tuesday Qatar, Xstrata’s second largest shareholder
and a potential kingmaker for the deal, said Glencore should pay 3.25 of its
shares per Xstrata share, rather than the 2.8 on offer.
The 11th hour move will make it difficult for Glencore and
Xstrata to push the merger through on current terms, several sources close to
the deal said, leaving only until Thursday evening for Glencore to sweeten the
deal or be forced to delay shareholder meetings scheduled for mid-July.
“This is probably the first time they (Qatar) have taken
such a stance on a high-profile deal.
"To me, it clearly shows the evolution of
the fund from being a quiet investor to an investment force to reckoned with,”
a senior Dubai-based banker said, speaking on condition of anonymity due to
business links with the fund.
Qatar Holding, the investment arm of Qatar Investment
Authority (QIA), has been building up its stake of around 11% in Xstrata since
February.
In a rare April media briefing QIA executive board member
Hussain al-Abdulla repeatedly dodged a question about the stake increase,
saying he was “legally advised” not to speak.
It halted its buying in June, but not before amassing a
position worth nearly $4bn at current market prices. That makes Qatar’s role
vital as Glencore’s bid needs approval from 75% of Xstrata shareholder,
excluding its own 34% holding.
“Looking back, all this stake building seems now to be part
of a clear strategy.
"A strategy to increase the stake and go to Glencore and
say, 'give us better terms or you won't see this merger through',” said a
second banking source who has advised the fund.
Glencore is expected to sweeten its bid in order to seal the
deal and said on Wednesday it would consider a proposal from the board of
Xstrata in relation to certain amendments to the management incentive
arrangements that were proposed as part of the deal.
For those who have tracked and advised the fund on some of
its most high-profile deals since inception, the move signals the fund’s growing role as an international
investor not afraid of taking a strong stand in large deals.
With stakes in such high-profile names ranging from German
sports car maker Porsche, luxury goods house LVMH to British bank Barclays, the
fund has clearly built a reputation as one of the most aggressive investors
around.
It has publicly expressed interest for commodity investments
and sits on an annual investment budget of between $30bn and $40bn every
year.
“How many investors in the world today have $30bn to spend
each year? When you are potentially showed every asset put on the block
globally, you can afford to be picky and demanding,” said the second banking
source said.
However, not many expect the fund to take up an activist
investor role in the future mainly to avoid political backlash and its lack of
management expertise to run companies.
“I would expect the fund to be opportunistic going forward.
"They are not interested in running companies they own and do not have the management expertise for it,” the first banking source said.
