Aug. 21 - Stronger than expected first half results could see Glencore dig its heels in over the price it will pay for miner Xstrata. Joel Flynn reports.
It's the $30 bln deal that has been a long time coming. The proposed Glencore-Xstrata merger has had both sides digging deep to get the best price. Now after better than expected results Glencore has said it could walk away from the deal for a year or two. Kevin Allison is from Reuters Breakingviews. (SOUNDBITE) Reuters Breakingviews, Kevin Allison, saying (English): "Glencore's trading business - the moving commodities around the world part of Glencore - did a lot better than expected. It's always been Glencore's contention that this trading business' resilience to falling commodity prices means it should be valued more than the market's giving it credit for. I think the first half results are only going to reinforce that argument for Glencore and make it less inclined to increase its offer for Xstrata." Many in the industry had considered a merger inevitable. But Glencore's chief executive Ivan Glasenberg told Reuters it was not "a must do deal" but a deal that "makes sense" Some say Glasenberg is bluffing, though it's not clear how far he'll go. (SOUNDBITE) Reuters Breakingviews, Kevin Allison, saying (English): "The deal may seem inevitable, but it only makes sense for both companies if the price is fair, and this is essentially the problem with the whole deal as it's been proposed. Xstrata shareholders don't think that they're getting a fair price for Xstrata, and I think, arguably, Glencore doesn't think that the market is valuing it's own shares correctly." When the planned merger was announced in February Glencore offered 2.8 shares for each Xstrata one. Qatari investors, who have a 12 percent stake in the mining giant, want 3.25. Xstrata shareholders will vote on the deal on September 7th. Neither side has shown any sign of blinking first and some analysts say there is now a risk the deal will collapse entirely. Joel Flynn, Reuters.