Glencore's chief executive Ivan Glasenberg called Qatar's bluff yesterday, giving the strongest sign yet that he will not cave into its demands to hike his £30bn offer for Xstrata.
Mr Glasenberg rebutted the Qatari sovereign wealth fund's claim that Glencore's offer for Xstrata undervalued the FTSE 100 miner, saying it was not a "must-do deal".
Qatar has significantly increased its stake in Xstrata to 11.7 per cent since the deal was announced in February, making it the second-biggest shareholder after Glencore, with 35 per cent, and in effect giving it the power to block the transaction on its own.
Mr Glasenberg said he could easily walk away, spend a few years developing Glencore through alternative acquisitions and then come back to Xstrata. If it doesn't happen now it's not the end of the world. We have been trying to do the deal for the last five years.
"If it takes another year, another two years or even another five years we can revisit the deal whenever. In the meantime, no one else can do anything while we hold our 35 per cent stake in Xstrata," he said.
Asked if he was categorically ruling out a higher offer for Xstrata, Mr Glasenberg said "you will have to draw your own conclusions".
Analysts said it suggested a hardening of his – already firm – stance on the terms of the deal.
Glencore, which is primarily a commodities trader but also has a mining operation, offered 2.8 of its shares for each of Xstrata's in an agreed, all-paper deal that values the miner at about £30bn at yesterday's stock price.
However, several key shareholders have threatened to vote against the deal unless the price is increased, notably Qatar, which is calling on Glencore to increase the ratio to 3.25, or about £35bn.
Mr Glasenberg was speaking after Glencore announced a better-than-expected 26 per cent decline in first-half profits, as relatively buoyant results from its trading arm helped prop up a larger drop in its mining business. This compared favourably to Xstrata, which recently reported a 43 per cent fall in interim profits.
Mr Glasenberg said Glencore's relative outperformance further weakened Qatar's case for raising the price and emphasised that Xstrata's chief executive, Mick Davis, also agreed a ratio of 2.8 was fair.
"This is not a hostile offer. It has the backing of Xstrata's management and of its independent directors. What do the Qataris see in terms of value which Xstrata's own management does not see? Why did they become buyers only once the merger was announced? Just to block it? I don't get it," he added.
Glencore shares rose 6.25p to 360p and Xstrata's 18.6p to 926.1p.
Lonmin rights issue?
The prospect of an emergency, $1bn (£633m) rights issue by Lonmin loomed large last night after the London-listed platinum producer said that the closure of its key Marikana mine in South Africa left it likely to breach its banking covenants.
The mine has been closed for the last 12 days after a strike by 3,000 rock drillers descended into a wave of violence that has left 44 people dead.
Following a profits warning on Thursday, a Lonmin spokesman said yesterday that "the company now considers that the balance of probabilities is that the impact on the production of the current events will result in covenants being breached at the next test date on 30 September 2012".
"The company is reviewing all the options available to strengthen its financial structure, including possible access to the equity capital markets," the spokesman added.