Ilya Naymushin/ReutersAn aluminum warehouse in Krasnoyarsk, in Siberia, operated by Rusal, a partner of Glencore International.

1:51 p.m. | Updated
LONDON – The sovereign wealth fund Qatar Holding said on Thursday that it would support Glencore International’s proposed $32 billion takeover of the mining company Xstrata.

The announcement comes less than a week before Xstrata’s shareholders will vote on the multibillion-dollar deal that would create a global mining and commodity trading giant with a market valuation of around $90 billion.

Qatar Holding “continues to see merit in a combination of the two companies and is satisfied with the terms of the proposed merger,” the wealth fund said in a statement on Thursday.

Qatar Holding is the second-largest shareholder in Xstrata after Glencore, and played an important role in successfully pressuring Glencore to increase its all-share offer.

Glencore raised its takeover bid in September, offering 3.05 of its shares for each Xstrata share; it had initially offered 2.8 of its shares for each Xstrata share.

Carlos Barria/ReutersCopper cathodes at the Yangshan Deep Water port near Shanghai. Xstrata is one of the world’s biggest miners of copper.

In raising its offer, Glencore also said its chief executive, Ivan Glasenberg, should take over the merged company six months after the deal was completed. Under the original terms, Xstrata’s chief, Michael L. Davis, and his management team were to retain control for a longer period.

Despite its support for the takeover, Qatar Holding, which owns a 12 percent stake in Xstrata, said it would abstain from a vote over proposed executive bonuses potentially worth more than $200 million that investors will be asked to approve on Tuesday.

In a bid to retain top executives, Glencore and Xstrata have offered the payouts, angering several major shareholders, including the activist investor Knight Vinke the British pension fund Standard Life.

Qatar Holding “is conscious of the sensitivities concerning governance issues in the U.K. and does not feel it appropriate to influence the outcome either way,” the fund said in reference to the proposed payouts.

Analysts said the backing of Xstrata’s second-largest shareholder for the takeover probably would lead to overall shareholder approval next week, despite concerns that investors might still reject the proposed payouts.

“In a nutshell, this means the deal is all but done,” Ash Lazenby, a mining analyst at Liberum Capital, wrote in a research note to investors on Thursday.

Shareholder groups remain divided over the deal. The investor advisory firm Pensions and Investment Research Consultants said last week that shareholders should oppose the takeover because of a lack of due diligence and board independence. Others groups, including Institutional Shareholder Services, have backed the deal but opposed the executive payouts.

Shares in Xstrata rose 1.6 percent in trading in London on Thursday, while shares in Glencore fell 0.7 percent.

In a complicated vote on Tuesday, investors will have three options when deciding on the deal: approve the merger and the retention bonuses; support the proposed combined group but not the bonuses; or oppose the deal altogether.

Qatar Holding said it would support the proposed takeover with or without approval of the retention bonuses.

In September, Xstrata’s board recommended that shareholders support both the merger and incentive plan.

A vote on the merger needs the backing of at least 75 percent of Xstrata’s eligible shareholders, while a decision on the retention bonuses only needs the support of 50 percent of investors. While Glencore is Xstrata’s largest shareholder, it is not eligible to participate in either vote.

“We have decided to decouple the resolutions to approve the merger from the resolution to approve the revised management incentive arrangements,” Xstrata’s chairman, John Bond, said in a statement on Sept. 30. “This will enable shareholders to vote in line with their convictions.”

Article source: http://dealbook.nytimes.com/2012/11/15/qatar-holding-supports-glencore-xstrata-deal/?partner=rss&emc=rss