Glencore / Xstrata: price stratas Is Qatar Holding being cute or plain reckless? On Tuesday the owner of about 11 per cent of Xstrata said it opposed the terms of the merger with Glencore. The agreed ratio is 2.8 Glencore shares for every Xstrata share. Qatar reckons 3.25 is "more appropriate." The reckless view argues that the deal may collapse because the higher ratio is miles away from the 2.7 implied by current share levels. And recent commodity price weakness already improves the attractiveness of the agreed ratio to Xstrata. For example, Liberum Capital calculates that a ratio of 3.2, assuming consensus commodity price forecasts, triples the potential dilution for Glencore. Why would it go for that? Better to let the merger collapse and return later with a bid where only a majority of votes is required for success, rather than the 75 per cent in the scheme of arrangement. In the real world, though, deals are done by personalities driven by more than just financial modelling. That is why the view that Qatar is being cute is more persuasive. Everyone knows that Ivan Glasenberg, Glencore chief executive, has been desperate to combine the companies for years. It was the main reason he took Glencore public. Does anyone really think he would not be prepared to go a little higher than the opening ratio agreed? Besides, the difference between 2.8 and 3.0, say - equidistant between 2.8 and Qatar's call for 3.3 - pales next to the companies" sensitivity to the commodity cycle, for example. The Qataris also know that Xstrata boss Mick Davis wants his payday. So he should help push for raised terms. And those peeved with the executive retention payments will no doubt be mollified by some kind of new incentive element. The ratio can then be bumped up to about 3 with everyone's heads held high. As before, however, the ultimate winners and losers will be determined by the commodity cycle.