Qatar's $3.3b Xstrata stake aids Glencore

Geneva Qatar Investment Authority's $3.3 billion (Dh12 billion) investment in Xstrata Plc this year boosts the chances that the merger the Swiss-based miner agreed to with Glencore International Plc will succeed, Jefferies Group said.

Qatar Investment, Doha's sovereign wealth fund that has more than $100 billion in assets, started buying shares of Xstrata in February and now holds 8.3 per cent of the stock, according to a filing Wednesday. The purchases also curb the need for Glencore to raise its offer of 2.8 shares for each one in Xstrata, Jefferies said.

Qatar's investment "increases the likelihood that the merger closes and reduces the pressure on Glencore to significantly increase the proposed share exchange ratio," analysts Christopher LaFemina and Seth Rosenfeld wrote Wednesday.

The Swiss commodities trader's bid values the shares it doesn't already own in Xstrata at about £22 billion.

Glencore, based in Baar, Switzerland, has faced calls from Xstrata investors including Schroders Plc, Fidelity Worldwide Investment and Standard Life Plc to raise its offer.

Glencore said Wednesday it expects to post merger documents to shareholders by the end of this month ahead of voting on the deal planned for early July.

It won't be allowed to vote its holding in Xstrata on the transaction, according to the UK's takeover code, putting the final decision into the hands of the shareholders who control the rest of the company.

Blocking stake

That means 16.48 per cent of Zug, Switzerland-based Xstrata's holders have the power to block the deal. Qatar Investment, or QIA, is the second-largest holder of Xstrata, behind Glencore, which holds about 34 per cent, and could purchase a blocking stake of more than 16.6 per cent, Jefferies said in its report.

"It is unlikely that the QIA would unequivocally demand a premium from Glencore and risk having Glencore walk away at this point," Jefferies said. "We would be surprised if it does not support the merger under the current proposed terms."

QIA has $30 billion to invest this year, board member Hussain Al Abdullah said last month.

Qatar Holding LLC, the fund's foreign investment arm, owns department store Harrods, is a shareholder of Volkswagen AG and holds 6.7 per cent of Barclays Plc, according to data compiled by Bloomberg.