Question marks hang over Qatar buying in Xstrata

Thu Apr 26, 2012 10:17am EDT
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By Clara Ferreira-Marques and Dinesh Nair

LONDON/DUBAI (Reuters) - Qatar's 7 percent stake in Xstrata XTA.L, makes it not only the miner's largest investor after Glencore, but also a potential kingmaker in the two companies' merger and an unknown quantity for its future that investors are desperate to read.

The reclusive sovereign wealth fund has been steadily buying Xstrata shares, spending some $2.7 billion to lift its holding from below 3 percent at the start of February, when the tie-up with commodities trader Glencore (GLEN.L: Quote) was announced.

It has bought virtually every day this month, a crucial period of courting for miner Xstrata and commodities trader Glencore, as the two jointly toured key investment funds.

Qatar has so far made no comment on its intentions, unnerving some investors who fear the Gulf state may force through Glencore's current offer that they argue undervalues Xstrata's growth. Others are concerned for the future, wondering whether secretive Qatar, which could hold almost 5 percent at current levels, will want to play a role in the company's development.

"They have shown in the past they can make big bets," said one source involved in the deal.

"The Emiratis have invested in Glencore, so (the Qataris) have obviously chosen Xstrata to be their vehicle, and they are certainly putting their money behind it," the source said, referring to Abu Dhabi's sovereign fund Aabar becoming the leading cornerstone investor in Glencore's initial public offering last year. It remains a holder of 1.4 percent.

"From my perspective this is, net net, a positive thing. They like the Xstrata story," the source said.

Sources involved in the merger and those familiar with Qatar expect the fund to ultimately back the $37 billion takeover of Xstrata by Glencore, which is offering 2.8 shares for every Xstrata share held.   Continued...