Qatar’s new-found activist approach to the $58bn merger of Xstrata and
Glencore has further distanced Qatar Holding from its regional sovereign wealth fund peers and placed it firmly in the spotlight.
“It’s very surprising,” said one senior Gulf investment banker. “It’s a new direction for the Middle East sovereign wealth funds because in the past they’ve tried to be as passive as possible.” Qatar Holding said in a statement last week that it was “seeking improved merger terms.” Glencore is offering 2.8 of its shares for each of the miner’s, but Qatar said an exchange ratio of 3.25 a share “would provide a more appropriate distribution of benefits of the merger”.
It joins a chorus of unhappy shareholders including Standard Life, Schroders and Fidelity, who have called for better terms but with 11 per cent of Xstrata shares, it has more clout than the rest put together. The statement from Qatar Holding was an exceptional intervention from a Gulf sovereign fund, known for its secrecy and behind-the-scenes deal making. The fund’s new stance comes amid increasing pressure on institutional investors by regulators and politicians, particularly in Europe, to be less supine and use their votes to call boards to account following the financial crisis. Since the onset of the financial crisis, Qatar has increased its global reach through minority stakes in well-known western companies and high profile real estate plays. At the same time, the gas-rich emirate has exerted itself politically as the loudest voice from the Gulf during the Arab Spring.
By vocalising its position over the exchange-ratio terms of the Xstrata-Glencore merger, Qatar has singled itself out from its regional counterparts including the older Kuwait Investment Authority and the Abu Dhabi Investment Authority, which have both identified themselves as passive investors.
In the wake of the announcement, onlookers and analysts are waiting to see how the fund might react to Barclays’ £290m fine for attempting to manipulate the London interbank offered rate.
In 2008 Qatar became one of the largest shareholders in Barclays as part of a controversial fundraising exercise. Having sold down part of its stake at the end of 2011, it still holds about 6.8 per cent. Qatar’s image as an investor abroad has not been without problems. In 2007, the Gulf emirate drew the ire of international markets as it dallied over its investment in supermarkets group J Sainsbury. It has also been difficult for foreign markets to differentiate between the various Qatari sovereign funds. Qatar Holding was founded by the Qatar Investment Authority in 2006 and acts as the holding company for strategic and direct investments.
Confusingly, its mandate does sometimes overlap with the QIA. Qatar Holding’s assets include Harrods, stakes in Hochtief, the German construction group, and Iberdrola, the Spanish utility.
The QIA, with an estimated $100bn in assets under management, also founded Qatari Diar, another state group, that is focused on real estate development and also invests abroad. Bankers are divided over Qatar Holding’s most recent play on the merger. One camp says the Qataris, by simply airing the same concerns as other shareholders, are asserting themselves as serious investors.
But the other camp sees the public move as overreaching and threatening to scupper a deal in which they have much skin in the game.
Source: Caye Global News
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