Before looking at the specifics of the deal, a review of its background provides an instructive foundation. Where did Xstrata come from? Glencore. Successor to Marc Rich & Co., Switzerland-based Glencore came into being in 1993 when Rich sold his controlling share. Although fundamen-tally a trading company, even by this time it had begun to acquire interests in mining and metallurgical operations. Initial moves to float its Australian and South African coal holdings through a listing for Enex Resources were thwarted by the September 2001 terrorist attacks in the U.S. The fol-lowing year, however, an IPO for Xstrata on the London stock exchange raised £1.34 billion, with Glencore retaining a 40% hold-ing. Xstrata was the new name for Südelektra Holding, a former Glencore met-als and minerals-sector subsidiary.

Subsequent corporate dealing reduced Glencore’s stake in Xstrata somewhat, such that it now holds 33.65%. This, as an ana-lyst pointed out in a recent Financial Times interview, essentially meant that “Glencore owns too much of Xstrata for anyone else to get involved”—a point borne out by the abortive $90-billion takeover moves made for Xstrata by Brazil’s Vale in 2008. The deal foundered over Glencore’s holding in and marketing relationship with Xstrata.

Glencore itself remained privately held by its partners until its IPO in London and Hong Kong in May 2011, which raised $7.9 billion and gave it a nominal market capitalization of $59.2 billion. The IPO involved the sale of just 12% of Glencore’s shares, although the free float has increased since then as staff lock-up con-straints have expired.

The announcement of the proposed ‘merger of equals’ in February (E&MJ, March 2012, p.4) should have come as no surprise, since it had been on the cards for at least two years beforehand. However, it was not long before the all-share offer of 2.8 Glencore shares for each unit of Xstrata stock was receiving some unfavorable com-ment in the financial press, with indica-tions that Glencore’s CEO, Ivan Glasenberg, was having to do some hard selling on the deal to institutional shareholders.

And so the process went on, through the spring and summer, with no clear outcome in sight—until Qatar Holding, the Gulf state’s sovereign wealth fund, raised an obstacle with its demand for a higher, 3.2:1 offer. With Qatar Holding having built up a 12% stake in Xstrata since the initial deal was announced, and now being in a position to block any acceptance vote, suddenly the merger looked anything but secure.