Week in Review

November 16, 2012 5:11 pm

Qatar nod raises hopes for Xstrata deal

Qatar’s sovereign wealth fund ended months of speculation this week when it said it would support the $66bn deal between trading house Glencore and miner Xstrata.

The announcement by the Gulf nation, whose 12 per cent stake in Xstrata has made it a kingmaker in the negotiations, means the merger is more likely to win approval at a vote of Xstrata’s shareholders on Tuesday.

However, Qatar said it would abstain from a vote on a controversial £140m package of retention bonuses for Xstrata employees, and that it would vote to approve the merger if the pay deal was voted down.

That raises the possibility that the deal could go through without the retention package in place – an embarrassing result for Xstrata’s board, led by Sir John Bond, which had argued that without the retention bonuses the “value proposition” of the combined company would be at risk.

The Qatari sovereign wealth fund said it was “conscious of the sensitivities concerning governance issues in the UK” and therefore had decided to abstain from the vote on retention payments. Nonetheless, it said it “strongly believes that retaining Xstrata’s operational management is of critical importance”.

Even if the merger is approved by the two sets of shareholders at meetings in Switzerland on Tuesday, Glencore and Xstrata are still racing to secure the approval of regulators – particularly the European Commission.

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