Qatar backing puts Glencore's $ 32 bn Xstrata deal on track
Qatar backing puts Glencore's $ 32 bn Xstrata deal on track
Qatar, an unexpected kingmaker in Glencore's bid for Xstrata, said yesterday it would vote for two key resolutions on the takeover, which is aimed at creating a mining and trading powerhouse.
In a snub to Xstrata management, Qatar said it will abstain from voting on a multimillion-pound management retention plan, which increases the chances of that aspect of the deal being voted down.
"In a nutshell, this means the deal is all but done," Liberum analysts said.
Qatar's support for the deal, first announced in February, came after its surprise opposition to terms in June and brought Glencore within weeks of sealing its long-running pursuit of Xstrata.
Separately, sources told Reuters that Glencore offered to sell Xstrata's German smelter to try to win European Union approval for the takeover, in addition to its existing offer to scrap a key zinc sales deal.
Through a series of votes, Xstrata investors will be able to express their views on the management retention plan without endangering the merger.
Xstrata has said the retention plan was necessary to the success of the merger because it will ensure key managers stay on to oversee the shift into a phase of significant volume growth at the company's mining projects.
"If the management incentive arrangements do not get passed, it raises some question marks about the success of the deal," Macquarie analyst Jeff Largey said.
Several Xstrata shareholders, including Standard Life Investments and Fidelity, have criticized the pay plan, arguing that it is unnecessarily greedy.
"I expect the deal to be approved but there to be considerable dissent about the retention packages," one top 40 investor told Reuters.
Qatar was reluctant to become involved in the debate over management pay, which has been raging in Britain since the so-called shareholder spring. Though Qatar has taken an active role in its investments, it was also reluctant to be branded an as an activist investor.
The tiny, gas rich Gulf state of Qatar has built up a stake of more than 12 percent in Xstrata — a key position in a deal structure that allows only 16.5 percent of Xstrata shareholders to block any bid.
Qatar's abstention on the retention plan, which offers more than 70 top executives a total of roughly 140 million pounds ($222 million), will be an embarrassment for Xstrata, which until last month insisted that the takeover be tied to the pay deal.
Macquarie analyst Largey said that Xstrata's image would not be enhanced by its attempt to be "a little too cute" with its stance on the retention scheme and vote.
The position of Xstrata Chairman John Bond, set to retain the role at the enlarged group, will look difficult if there is a vote against the retention scheme. Such an outcome could strengthen the view of some shareholders that, having been behind a retention plan that risked sinking the deal, he should not remain at the helm of the merged entity.
The vote, scheduled for Nov. 20, comes after Glencore bowed to investor pressure with a raised bid in September. Glencore increased its offer to 3.05 new shares for every Xstrata share, from an earlier bid of 2.8 per share.
Shares in Xstrata rose 1.7 percent to 963.7p at 1238 GMT on Thursday, moving closer to Glencore's offer, indicating that the market expects the deal to go ahead, while Glencore's shares traded down 0.54 percent.
EU competition regulators will give their verdict on the tie-up two days after the Xstrata shareholder vote.
The regulators have said that Glencore's offer to end an exclusive zinc sales deal and sell its minority stake in world No. 1 producer Nyrstar is not enough, two people familiar with the matter said yesterday, prompting Glencore to offer to also divest an Xstrata smelter in Germany which produced 148,000 tons of zinc last year.
Antoine Colombani, spokesman for competition policy at the European Commission, would not comment on the matter.
US unveils new veto threat against WTO rulings
- US tells WTO appeals rulings in trade disputes could be vetoed if they took longer than the allowed 90 days
- Trump, who has railed against the WTO judges in the past, threatens to levy a 20 percent import tax on European Union cars
GENEVA: The United States ramped up its challenge to the global trading system on Friday, telling the World Trade Organization that appeals rulings in trade disputes could be vetoed if they took longer than the allowed 90 days.
The statement by US Ambassador Dennis Shea threatened to erode a key element of trade enforcement at the 23-year-old WTO: binding dispute settlement, which is widely seen as a major bulwark against protectionism.
It came as US President Donald Trump, who has railed against the WTO judges in the past, threatened to levy a 20 percent import tax on European Union cars, the latest in an unprecedented campaign of threats and tariffs to punish US trading partners.
Shea told the WTO’s dispute settlement body that rulings by the WTO’s Appellate Body, effectively the supreme court of world trade, were invalid if they took too long. Rulings would no longer be governed by “reverse consensus,” whereby they are blocked only if all WTO members oppose them.
“The consequence of the Appellate Body choosing to breach (WTO dispute) rules and issue a report after the 90-day deadline would be that this report no longer qualifies as an Appellate Body report for purposes of the exceptional negative consensus adoption procedure,” Shea said, according to a copy of his remarks provided to Reuters.
An official who attended the meeting said other WTO members agreed that the Appellate Body should stick to the rules, but none supported Shea’s view that late rulings could be vetoed, and many expressed concern about his remarks.
Rulings are routinely late because, the WTO says, disputes are abundant and complex. Things have slowed further because Trump is blocking new judicial appointments, increasing the remaining judges’ already bulging workload.
At Friday’s meeting the United States maintained its opposition to the appointment of judges, effectively signalling a veto of one judge hoping for reappointment to the seven-seat bench in September.
Without him, the Appellate Body will only have three judges, the minimum required for every dispute, putting the system at severe risk of breakdown if any of the three judges cannot work on a case for legal or other reasons.
“Left unaddressed, these challenges can cripple, paralyze, or even extinguish the system,” chief judge Ujal Singh Bhatia said.
Sixty-six WTO member states are backing a petition that asks the United States to allow appointments to go ahead. On Friday, US ally Japan endorsed the petition for the first time, meaning that all the major users of the dispute system were united in opposition to Trump.