The late-night negotiating session that led to a sweetened takeover offer by Glencore International Plc for Xstrata Plc on Sept. 7 included a former British prime minister and a swashbuckling commodity-trading billionaire. It’s possible neither was the most influential man in the room at London’s Claridge’s Hotel.
That distinction might instead go to the two executives who run the $100 billion Qatari sovereign wealth fund -- Qatar Prime Minister Hamad bin Jassim bin Jabr Al-Thani, 52, owner of one of the world’s biggest yachts, and Qatar Holding LLC Chief Executive Officer Ahmad Mohamed Al-Sayed, who was named to head the fund in 2008 at the age of 32, after attending law and business schools in the U.S.
Their insistence on a higher price from Glencore, the largest publicly traded commodities supplier, was a rare example of a sovereign wealth fund injecting itself into a merger of such scale, said Rachel Ziemba, an analyst at Roubini Global Economics in London. It underscored Qatar’s new, outsized role in global politics and business, evidenced by stakes in French oil giant Total SA, Royal Dutch Shell Plc, and Al Jazeera, the global news channel.
“This is part of a willingness and even desire of members of the royal family to be more visible,” and to use their investment muscle to generate greater returns, Ziemba said.
Sheikh Hamad, who is also the wealth fund’s chairman, and Al-Sayed hammered out the agreement Sept. 6 at Claridge’s with Glencore’s hard-charging CEO, Ivan Glasenberg, and a few advisers, according to a person with knowledge of the meeting.
Mediating was former U.K. prime minister Tony Blair, a senior adviser to JPMorgan Chase & Co., which is advising mining company Xstrata. Claridge’s is a few blocks from Glencore’s London offices -- more convenient, perhaps, than the Shangri-La Hotel in the 72-story, Qatari-owned Shard skyscraper about a mile away.
Qatar, whose 12 percent stake in Xstrata made it Glencore’s largest obstacle, had objected to the original terms announced in February. On June 26 the Qataris asked for a 16-percent-higher price, setting off a new round of negotiations. Still unhappy, the Qataris said Aug. 30 the fund intended to vote against Glencore’s proposal of 2.8 shares for each Xstrata share.
That opposition eventually led to the Claridge’s showdown, resulting in Glencore raising its all-share bid to 3.05 shares, valued at a total of 22 billion pounds ($35 billion), the biggest announced merger this year. Qatar compromised from its sought-after ratio of 3.25.
Xstrata’s board may soon recommend its support of the offer, people familiar with the situation have said, and has set a deadline of Sept. 24 to respond formally. Qatar is likely to let Xstrata’s decision guide its own, two people said.
Xstrata shares have risen 3.9 percent since the new offer, and declined 0.7 percent to 1,053.5 pence in London today. Glencore shares fell 2.1 percent to 371 pence at the close.
Qatar Holding is the world’s 12th-largest sovereign wealth fund, according to the Las Vegas-based SWF Institute, well behind such funds as Abu Dhabi’s $627 billion Investment Authority. Its riches are a function of gas reserves -- the world’s fourth-largest -- and a population of just 2 million, who inhabit a country about the size of Connecticut.
Prior to this year, many of the fund’s investments were in trophy assets like London’s Harrods department store and a stake in the owner of the skyscraping Canary Wharf financial district.
As both chairman of Qatar Holding and prime minister, Sheikh Hamad, a cousin of the ruling Emir, plays a critical role, said Kristian Coates Ulrichsen, a professor of Middle East politics at the London School of Economics.
Qatar Holding is “the vehicle” of the prime minister, who is seeking to increase his influence while Qatar’s crown prince, Sheikh Tamim bin Hamad Al-Thani, builds his own power base by shepherding events such as the planned 2022 World Cup of soccer in Qatar, Ulrichsen said. That makes further high-profile deals likely as they jockey for leadership, he added.
A long-time civil servant, Sheikh Hamad has served as the country’s minister of municipal affairs and minister of foreign affairs. He became prime minister in 2007. He also chairs the international advisory council for the Brookings Doha Center, the Middle East branch of the Washington-based think tank.
His yacht, named Al Mirqab, is 133 meters (436 feet) long. In 2007 he paid a then-record 100 million pounds for a 20,000 square-foot penthouse London apartment, according to the London-based Times.
Al-Sayed has risen quickly. He received a bachelor’s degree in law from Qatar University before getting a law degree from Boston University and an MBA from New York University. He serves on numerous boards, including those of Harrods Group Trustees Ltd, Canary Wharf Group Plc, Qatar National Bank and the Qatar Exchange, which is 20 percent owned by NYSE Euronext.
Qatar’s current Emir, Sheikh Hamad bin Khalifa Al Thani, has steadily expanded Qatar’s role as a global investor since overthrowing his father in a bloodless coup in 1995.
The country’s high-profile deals this year have occurred across a broad range of industries. In August it agreed to spend $1.45 billion for a 20 percent stake in BAA Ltd., the owner of London’s Heathrow airport. That followed a deal in June to take a 49 percent stake in AUX, a Brazilian gold-mining business, for about $2 billion from billionaire Eike Batista, according to a person with knowledge of the transaction. It also acquired a 3 percent stake in Total, now worth about $3.7 billion, and a stake in Royal Dutch Shell.
Qatar’s eagerness for the spotlight extends beyond finance. The Qatari state continues to bankroll Al Jazeera and also played a key role in the uprisings of the Arab Spring, backing rebel groups in Libya and Syria and using its financial muscle to support Egypt’s new government, which is dominated by the Muslim Brotherhood.
Those interventions are themselves likely to lead to further deals for Qatar as the countries rebuild and open up to foreign investment, Ziemba said. “The politics and the economics go hand in hand.”