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Sun 18 Nov 2012 04:38 PM

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Retail investors pose hurdle to Glencore-Xstrata deal

Qatar Holding owns a 12 percent stake in Xstrata; 1,500 retail investors pose further hurdle

Retail investors pose hurdle to Glencore-Xstrata deal
The success of commodity giant Glencore’s US$80bn merger with Xstrata could rest on 1,500 retail investors.

The success of commodity giant Glencore’s US$80bn merger with Xstrata could rest on 1,500 retail investors when shareholders take part in a series of votes on Tuesday, The Telegraph reported.

Qatar Holding, which has built up a 12 percent stake in Xstrata, on Thursday said it would vote for the merger but said it would not support the controversial retention packages for Xstrata’s management.

The sovereign wealth fund’s decision means that around 1,500 retail investors - who represent around 1 percent of Xstrata’s shareholders - are expected to hold disproportionate sway over the outcome, the newspaper said.

Xstrata needs 75 percent of the vote to push the multi-billion dollar merger through.

Shareholders can either back the deal with or without the retention payments. Then a separate vote on the “golden handcuff” packages will he held, which must match the first vote meaning that if the first vote agrees to the deal with the payments then a separate vote on the payments must also be passed.

The second vote needs a 50 percent majority, which would give more weight to how the small investors vote. They could represent as much as a 30 percent vote on Tuesday, the newspaper, said citing unnamed insiders.

The generous retention packages designed to keep Xstrata’s senior managers in place after the deal have been some of the biggest stumbling blocks since the deal was first announced in February. 

The deal has been on the verge of collapse several times after shareholders including Qatar Holding, said they would vote against it unless Glencore improved the terms of its offer.

The world’s largest commodities trader in September boosted the price to 3.05 of its shares for each Xstrata share, from 2.8. The firm also proposed Glasenberg run the combined company following an initial six-month stint for Xstrata CEO Mick Davis.

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