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Business Comment

Simon English: What would you pay for slightly used commodities giant Glencore?


Outlook Last May the commodities trading giant and all around company-of-the-future Glencore came to the stock market, turning a private concern into a public company owned by our pension funds and other supposedly savvy investors.

More than a few sages – and a bunch of blokes on the 341 bus through north-east London, who openly know nothing about the commodities market – made the following observation.

If a gang of the most brilliantly smart traders in the history of the world are selling something, that must mean they think we're at the top of the market. Why on earth would you buy?

So far the boys on the bus look like wiser judges than the City.

Glencore floated at 530p. Price last night? 298.3p.

The bankers involved in securing this float would say that they got the best price they could for their client.

You might say that they only get away with such shameless hucksterism because the pension fund managers are investing our money rather than theirs and don't want to create any trouble by appearing to be awkward.

The stock market's present view of Glencore's worth is seriously hindering its bid to takeover Xstrata in an all-share deal.

Qatar Holdings, Xstrata's biggest shareholder outside the staff, say if they are going to get Glencore paper in return for their investment, they shall need much more of it.

Xstrata, until now, has been insisting that the terms of the takeover are fair and good. The £173m that will be paid over time to its top executives, should the deal go through, is incidental. And those executives might be willing to have those payments made in shares rather than cash (that is not them admitting the shares might be worth less than real money. Wash your mouth out).

They have laser-like focus on shareholder value. Pay to the top brass is a side issue.

So it must have been a fly-by-night news source reporting the following yesterday:

"Xstrata wants Glencore to guarantee Xstrata chief executive Mick Davis a position on the board of the new company, with a salary of £9.5m and performance incentives worth 400 per cent of his salary for the first three years."

You really can't trust the BBC.

Whether Qatar will get the terms it says it wants – 3.25 Glencore shares for each Xstrata share rather than 2.8 – is not clear, but plainly it is open to offers. Best of luck.

There's a temptation in some quarters to imagine that the Qataris' intervention here is part of the so-called shareholder spring.

Others are less sure that this shareholder spring has reached Qatar. The Arab spring hasn't even made it to Qatar, says the bloke on the 341.