Ivan Glasenberg, the billionaire commodities tycoon behind Glencore, took a massive gamble yesterday as he fought to rescue his dream of taking over mining giant Xstrata.
With the £50bn merger seemingly falling apart and Qatar, a major Xstrata investor, having turned against it, Glencore suddenly upped its bid at the last moment possible, as investors were gathering to vote on the original deal.
Mr Glasenberg, the chief executive of the Swiss-based trading behemoth, increased the offer from 2.8 Glencore shares for every Xstrata share to a ratio of 3.05, a move that would give Xstrata shareholders a bigger share of the combined business.
But rather controversially, the new terms would see Mr Glasenberg becoming chief executive, with Xstrata's highly rated Mick Davis seemingly sent packing. He would get a compensation package of at least £8m.
The move raises the prospect of Glencore making its offer hostile in all but name, smashing the notion the deal is friendly. Xstrata reacted with anger, saying the loss of Mr Davis would represent a "significant risk" to the future success of the business. Analysts point out that while Mr Glasenberg is a brilliant trader, he has not run a mining company.
The Qataris' position is unclear. They had said a share ratio of 3.25 would get them onside, but that assumed a stable merger deal with Mr Davis remaining with the company.
One oddity among many is the last-minute intervention of Tony Blair. The former prime minister, an adviser to Qatar's banker JPMorgan, appears to have acted as a middle man between the Qataris and Glencore, trying to persuade each side to see the other's point of view. Mr Blair's office declined comment.
The City Takeover Panel is now likely to lean on Glencore to issue full details of its proposal soon, perhaps by Monday. One analyst said: "For a hostile takeover, a share ratio of 3.25 is still cheap, but clearly Qatar are the kingmakers. Perhaps going hostile is what Glasenberg had his eye on all along."
Glencore, with a 34 per cent stake in Xstrata, believes the deal would create a mining and trading powerhouse. It joined the stock market last year, partly to provide a currency it could use to drive through takeover deals.
The suddenness of the increased offer seemed to catch Xstrata off balance. It said in a statement about the developments: "This is not a firm offer. Any elements of the proposal remain subject to change and the proposal also remains subject to Xstrata plc board approval."
Charles Gibson, the head of mining at Edison Investment Research, said: "Should the deal go ahead via a higher offer, it would be a vindication of Xstrata shareholder concern about long-term fundamentals being fairly valued, while for Glencore the pressure will be on to prove that the higher price was justified.
"In the meantime, it remains to be seen whether Xstrata shareholders will have the patience to back some of the Xstrata board at a new enlarged Glenstrata."
A statement issued by Xstrata also said Glencore could consider changing the offer's structure from a complex arrangement that requires 75 per cent approval without Glencore to a straightforward takeover requiring a simple majority.
"We've always thought that there was a reasonably good chance Glencore would bump the offer modestly, and we believe that Qatar will probably accept this 3.05," Brewin Dolphin's analyst Nik Stanojevic said.
The revised offer pleased shareholder Standard Life. We are supportive of the improved terms and the changes to the executive governance arrangements," David Cumming, the head of equities at the insurer, said.
"The deal will, we believe, enhance the growth prospects of the combined group and consequently, as shareholders both of Xstrata and Glencore, we are pleased with the proposed outcome."
That the deal could be back on is a huge relief to bankers in the City who were looking at the loss of tens of millions of pounds in fees.
Glencore is being advised by Citigroup, Morgan Stanley, Credit Suisse and BNP Paribas. Xstrata is being advised by Deutsche Bank, JPMorgan, Goldman Sachs and Nomura, with a role also for Barclays Capital. As traders digested the turmoil, Glencore shares fell 3.6 per cent to 378.05p while Xstrata rose 3.6 per cent to 1,014p.
Multi-billionaire Ivan Glasenberg may just have done enough to win over doubting Xstrata shareholders and install himself as chief executive of an empire that produces and trades everything from wheat to copper. The diminutive South African started as a coal trader at what became Glencore in 1984, leading a buyout from founder Marc Rich a decade later.
Mick Davis turned Glencore's coal assets into a mining giant in less than a decade of deals. The former Billiton finance director was a part-time accountancy lecturer at Witwatersrand University in South Africa when he first encountered Mr Glasenberg. He misjudged the mood with a £30m retention package and could be out of a job if the deal goes through.
SIR JOHN BOND
From phones to mines, Sir John Bond vacated the Vodafone chair for that of Xstrata last year, and is expected to fill the same post at the merged company. He spent 45 years at HSBC, where he began as an international manager aged 19. He has acted as a lightning rod for shareholder complaints that the deal wasn't generous enough.
SIM ON MURRAY
Five years in the French foreign legion helped to steel Simon Murray for the tough task of chairing Glencore through its stock-market flotation last year. The long-time lieutenant of Hong Kong tycoon Li Ka-shing got off to a bad start by saying he wasn't keen on employing women, and is expected to stand down if the merger goes through.
A surprise intervention from Tony Blair has helped to push the deal forward. Mr Blair, who is keen for a new role in the corporate world and was once mooted as a chairman of BP, is an adviser to JPMorgan and has strong Middle Eastern links that enabled him to mediate with the Qataris.
Rainmaking investment banker Ian Hannam may have stood down from his post at JPMorgan in April but he has still kept a hand in the year's biggest deal. The father-of-three was fined £450,000 by the FSA for allegedly passing on inside information. He internationalised the FTSE 100 by bringing Mexican, Indian and Kazakh miners to London.
HAMAD BIN JASSIM BIN JABER AL-THANI
Sheikh Hamad bin Jassim bin Jaber al-Thani is not a typical activist investor. Qatar Holding, the sovereign wealth fund that he chairs as state prime minister, amassed a 12 per cent stake in Xstrata only to demand better merger terms from Glencore. Other assets include Harrods and stakes in Sainsbury's and car maker Porsche.Reuse content