Glencore says Xstrata deal is not a 'must-do'

http://www.guardian.co.uk/business/2012/aug/21/glencore-xstrata-deal-qatar

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Glencore's $30bn bid for miner Xstrata is not a "must-do deal" its chief executive said on Tuesday, in the company's strongest warning to date that it will not yield to demands by rival shareholder Qatar for a higher price.

Ivan Glasenberg sppoke as the commodities trader reported a smaller than expected drop in first-half profits and signalled exasperation with Qatar Holding. The sovereign wealth fund has built a stake of almost 12% in Xstrata – well shy of Glencore's roughly 34% stake but enough to potentially block the takeover deal at a vote next month.

Glencore, already the single largest shareholder in Xstrata, announced in February it would bid for the stock it does not already own, offering 2.8 new shares for every Xstrata share held. Qatar, however, surprised the market in June by demanding a ratio of 3.25 after months of silence.

"We cannot understand the position of the Qataris, asking for more than the 2.8 ratio. We have seen nothing coming out of recent results that supports this, in fact we have seen quite the opposite," said Glasenberg.

"It is not a must-do deal. It is a deal that we believe makes sense … but if shareholders have another opinion … it is their choice."

Qatar gradually accumulated shares after Glencore's all-share bid for Xstrata was announced in February, lifting its stake from 3% to more than three times that. It paused purchases after June's surprise announcement that it was demanding improved terms, but it has since resumed.

Glencore said its own profits for the six months, which were supported by resilience in its marketing operations, did little to support pressure for a stronger bid.

Glencore said net profit for the first half was $1.81bn, down 26% and marginally above expectations, as the impact of weaker prices was tempered by resilience in metals and agricultural trading.

Overall operating profit for Glencore's marketing arm fell 11%, dented by tough comparisons with a strong first-half for energy trading last year, while its industrial businesses saw operating profit fall 32%.

Miners have had a torrid earnings period, reporting their first profit falls since 2009, as margins become squeezed by stubbornly high costs and weaker prices for key commodities.

"Looking forward, we neither anticipate nor assume any material improvement in overall market or economic conditions in the near term," Glasenberg said.