Glencore ready to pull out of Xstrata merger

GLENCORE’s high-profile merger with Xstrata is not a “must-do deal”, its chief executive admitted yesterday, after the commodities trading giant reported a 26 per cent slide in profits in the first half of the year.

Chief executive Ivan Glasenberg said that if the $30bn (£19bn) “merger of equals” weren’t to go ahead, “it wouldn’t be the end of the world”.

Glencore has been caught in talks with Xstrata’s second-biggest shareholder, Qatar Holding, which is demanding an improved share ratio to Glencore’s proposed 2.8 Xstrata shares for each share in the merged firm.

Qatar has increased its holding to 12 per cent of Xstrata from three per cent after Glencore’s bid for the miner was announced earlier this year. Glencore still owns 34 per cent of Xstrata, but Qatar’s holding could be enough to block the takeover.

Glasenberg said yesterday that he is standing firm on the 2.8 ratio offered, adding that it was a “good deal”, and it was one that has been agreed by Xstrata chief Mick Davis and independent board members.

Weak commodity prices were behind Glencore’s first-half profit falls. The commodities giant saw its first-half net profit fall to $1.81bn, from $2.44bn over the same period last year. Glasenberg added that he saw “no material improvement in overall market or economic conditions in the near term”.

Meanwhile, Glasenberg shrugged off any worries of clashes in its coal mines in South Africa following the violence at Lonmin’s Marikana mine, adding that Glencore is a “great supporter” of the country.