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Glencore's Xstrata bid near collapse as shareholders vote
LONDON (Reuters) - Glencore's (GLEN.L) $34-billion bid for miner Xstrata XTA.L stands on the brink of collapse on Friday, with only hours to go before a shareholder vote and little sign of a resolution to the impasse that has pitted the trader against rival investor Qatar.
An 11th-hour agreement between Glencore and Qatar, the top two shareholders in Xstrata, could still get the deal over the line. But time runs out on the drawn-out merger effort on Friday morning, when shareholders on both sides are called to meetings in the Swiss lakeside town of Zug, Xstrata's home base.
"In M&A, one should never rule out a last-minute twist, but I am quite skeptical it will happen," said one source involved in the deal, pointing to the entrenched positions of Glencore and Qatar, which has become Xstrata's second-largest shareholder with a 12 percent stake and is opposing Glencore's offer.
"Attitudes and postures are very important in deals, and when you reach a certain point, it is difficult to pedal back."
Glencore investors are due to start meeting at 9 a.m. (0700 GMT), with Xstrata's meeting following a couple of hours later.
Under the deal's structure, holders of just 16.5 percent of Xstrata's shares need to vote against the planned tie-up for the deal to collapse. Qatar said last week it would vote against the Glencore proposal - making it virtually impossible the bid will go through without an improvement, or a truce between the two.
Yet Qatar and Glencore have not met since the Gulf state's sovereign wealth fund demanded an improvement in June to the trader's offer and both sides say they are sticking to their positions. Glencore has said that the deal is not a "must do".
Sources familiar with the deal are skeptical the two sides could reach a deal after two months of silence, though the position of Glencore's managers as majority shareholders - with Chief Executive Ivan Glasenberg alone holding almost 16 percent - make it impossible to write off the possibility.
"It would surprise me very much," one industry source familiar with Glencore said.
"It is getting to the point where it is practically impossible ... but you can't rule out last- minute phone calls. And you are only dealing with an individual - it is just Ivan.
"In theory, they could get something done and delay the vote. But I struggle to think it is possible and the market doesn't think so."
If Glencore changes the terms of its offer at the last minute both companies will have to delay shareholder votes to meet regulatory requirements, probably by at least two weeks.
Glencore, with a 34-percent stake, has long coveted a full tie-up with Xstrata to create a mining and trading powerhouse. It made its move in February, less than a year after a listing largely motivated by the desire to do more ambitious deals.
Glencore proposed an all-share deal that would have been one of the biggest to date in the industry, offering 2.8 new shares for every Xstrata share it does not already own.
But that offer, though recommended by Xstrata's board, has been in question since Qatar demanded a ratio of 3.25.
At Thursday's closing share prices, the market's implied ratio is 2.5 times - not quite close to the deal terms, but arguably not excluding the possibility of a last-minute agreement. It is also higher than it was earlier this week.
"There's just a bit of me that thinks they will get it over the line, perhaps by bumping to 2.95 or something," said one investor, who holds less than 1 percent of Xstrata stock.
"The Qataris haven't been buying in the market lately, which makes me think that they are having live conversations with Glencore. I think I am 50:50 - but, that said, I am still not brave enough to go out and buy shares."
($1 = 0.6275 British pounds)
(Reporting by Clara Ferreira-Marques, Sophie Sassard and Sinead Cruise; Editing by Alastair Macdonald)
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