By rejecting Glencore's coveted acquisition of miner Xstrata, Qatar could also put paid to the reputation of Ivan Glasenberg, chief executive of the commodities trader, as consummate dealmaker.
Those who have worked with him on takeovers - and against him defending the companies he targeted - say Glasenberg's self-belief is second to none. That, plus unbending determination, means he normally gets his way.
But this time he appears to have been wrong-footed, thinking the support of major Xstrata shareholder Qatar Holdings was in the bag.
“Did Glencore misread the Qataris? Absolutely,” said one banker familiar with the mining sector, but not involved in the deal. “Qatar does not like the limelight, so they must feel pretty strongly to end up going public.”
Apparently undeterred by the rejection, Glasenberg showed little relish for compromise, letting it be known he would not overpay.
Glencore's position had not changed, a person familiar with the matter said, and the company would rather walk away than offer more. Bankers said such talk was a standard M&A tactic and to be expected of any company in such negotiations.
It is not only Glasenberg's track record that is under the microscope following Qatar Holdings' surprise demand for better terms for the takeover. The bankers advising him may also have been caught napping.
The stakes are high for all involved, with banking teams working on the deal standing to lose out on a pay day worth up to $130 million if the $26 billion deal collapses. Xstrata was due to pay up to $80 million to its financial advisers, while Glencore may have to shell out up to $50 million.
With fee income in retreat after a 25 percent fall in worldwide M&A volumes in the first half of the year, such pay days are more important than ever for bankers struggling to bring in revenue for their increasingly cost-conscious employers.
The combination of Glencore and Xstrata would rank as the biggest-ever done deal in a sector littered with the skeletons of failed deals. These include the $144.5 billion hostile bid for Rio Tinto by BHP Billiton in 2008, and BHP Billiton's more recent $39.7 billion offer for Canada's Potash .
Glasenberg is not the only executive to have been exposed by the failure to get “Glenstrata” blessed by shareholders.
His opposite number at Xstrata, CEO Mick Davis, was not listening to the mood music over executive pay when he secured himself a $45 million three-year retention package to seal the miner's deal with Glencore. The mining group was forced to convert it to an all-share, performance-related package after an embarrassing shareholder outcry.
Qatar Holdings, which has remained silent for months as it built up the second-largest stake in miner Xstrata - about 11 percent - pushed the deal to the brink on Tuesday, demanding better terms before it would support the deal.
The wealth fund is part of a new breed of investors in the mining sector, focused on creating long-term value and acting on motivations that are sometimes at odds with a more numerous body of investors looking at a shorter timeframe.
Despite the apparent blow to Glasenberg's plans, hedge fund managers said it was too soon to say he had been outwitted by the Qataris.
“Glasenberg is always the smartest man in the room and always one step ahead of everyone. We don't know what is going on behind closed doors,” a hedge fund manager who owns Xstrata stock said.
“Hedge funds always think they are smarter than the chief executive, but not when it comes to Ivan,” he added.
A second hedge fund manager said Glasenberg would do whatever was in the best interests of Glencore, whether that was to stump up more or let the deal die.
“He is one of the most capitalist individuals I have ever seen. He will change what he needs to change to get the best outcome,” the second hedge fund manager said.
BANKING ON A DEAL
The deal was already proving difficult for bankers before the Qatari move. They are facing lower fees due to the unique role of former Citigroup grandee turned independent go-between Michael Klein.
It was Klein's ability to get Glasenberg and arch-rival Mick Davis to agree on a valuation that put the deal on the table. Klein is expected to earn between $10 million and $15 million for his work and could be called upon to help smooth out the latest wrinkle, sources said.
Klein's slice of the fees will mean less for Citigroup, Morgan Stanley, Credit Suisse and BNP Paribas, Glencore's advisers.
Deutsche Bank, JP Morgan, Goldman Sachs, Nomura and Barclays, advisers for Xstrata, will also receive a smaller proportion because of Klein's intervention.
London's “mining king”, Ian Hannam, the veteran rainmaker who resigned from JP Morgan last month to fight a 450,000-pound fine imposed by British regulators for passing on inside information, is also involved in the transaction, and teams at Citigroup and Morgan Stanley include veteran UK advisers David Wormsley and Simon Robey, among the biggest names in corporate finance in the City of London.
With stakes so high, all will be banking on Glasenberg showing his usual ability for getting the deal done.
“Is he the smartest man in the room? Let's see where the deal goes,” the second hedge fund manager said. - Reuters