A new twist in the Glencore-Xstrata merger deal saw Norway joining with Qatar Holdings in opposing the $70 billion deal between commodities trader Glencore and miner Xstrata, jeopardising the chances of one of the biggest deals in the natural resources industry in the past 10 years.
Norges Bank Investment Management (NBIM), Norway’s oil-backed sovereign wealth fund manager had been buying Xstrata’s stocks in the past few weeks, spending more than $500 million, as per regulatory fillings.
The step taken by NBIM duplicates the strategy adopted by Qatar of boosting its stake in the miner to empower itself against the deal. With the stock buying spree, NBIM has now become the fourth largest shareholder in Xstrata, behind Glencore, Qatar and BlackRock, with 87.8 million shares, equal to roughly 2.97% of the total and up from 1.72% in June.
The Norwegian decision to buy huge number of Xstrata stocks came after NBIM privately indicated to both Xstrata and Glencore that it opposed the current terms of their planned merger.
The stock market is widely betting that the merger will fail, with the share ratio between the commodities trading house and the miner falling on Tuesday to 2.445 times, the lowest since the deal was announced in February.
Bankers involved in the deal believe just 12%, the stake controlled by Qatar, would be enough to block the merger as some shareholders would either abstain or not vote.
Glencore chief executive Ivan Glasenberg and Mick Davis, his counterpart at Xstrata, have two weeks time to coax Ahmad al-Sayed, head of Qatar Holding, and Yngve Slyngstad, NBIM chief executive, before a vote of Xstrata shareholders scheduled for September 7.