High stakes poker at the "Glenstrata" table Roger Agnelli, the former chief executive of Vale, knows what is to play high stakes poker with Ivan Glasenberg, the billionaire chief of Glencore. "Ivan is a tough negotiator," he told the Financial Times in an interview in 2008 after Vale failed to merge with Xstrata, the FTSE 100 mining group in which commodities trader Glencore is the largest shareholder, with a stake of roughly 34 per cent. After three months, including at least one round of talks in Rio de Janeiro, Mr Agnelli folded his hand. Fast forward four years, and Ahmad Mohamed Al-Sayed, the head of Qatar Holding, has replaced Mr Agnelli at the poker table. But the game is strikingly similar. So is the first hand of cards, with both sides opting for the bluff. But who really has the best hand? Mr Al-Sayed is insisting that he would only accept a merger between Glencore and Xstrata if the trader pays 3.25 of its shares for each of the miner. Mr Glasenberg is adamant that his initial offer of 2.8 shares is already high enough. Both say they are ready to walk away from the table and let the deal collapse. On paper, both Glencore and Qatar Holding could claim they hold the best cards. Mr Glasenberg, for example, is in no rush to buy Xstrata. Glencore is already the largest shareholder, controlling enough equity to block any interloper. In short, he could walk away from the merger and still come back in a year's time. He has waited for many years to complete his "dream" merger and will not mind waiting another one. The Glencore-Xstrata merger is, in that sense, completely different from the trader's recent dealmaking. When Glencore bought gain dealer Viterra earlier this year it ended paying a bit more than expected, but only because Glencore knew it was competing against another bidder: New York-listed ADM. With Xstrata there is no competitor, nor is one likely to emerge. If Qatar does not show flexibility, it can be sure that Mr Glasenberg will walk out. Yet the Qataris are also holding some good cards. The sovereign wealth fund's response to Glencore's threat of walking away is likely to sound something like this: "Do you want to wait? We can wait. Indeed, while most institutional investors have horizons measured in months, some maybe a few years, Qatar is thinking in decades if not longer. It can ride out any fears of a short-term dip in Xstrata's valuation if the deal collapses. Indeed, it could very well stick to its demand of 3.25 shares: Glencore could walk away now, but in a year's time Qatar and its 11 per cent shareholding will be waiting. Those are the good cards. But both sides have a few weak ones too. For Glencore, the deal is critical to Mr Glasenberg's plan to use "Glenstrata" as a beachhead to build a natural resources group that could put the likes of BHP Billiton and ExxonMobil in the shade. In effect, he wants to be the Apple of natural resources. Then there is the problem of Glencore's debt: the credit rating agencies have already warned they could downgrade the commodities house to just a notch above junk status. Back in Qatar, the sovereign wealth fund has a longer horizon for its investment, but it is already making a loss on Xstrata. Arguably it only started to rapidly increase its stake in Xstrata after Glencore launched its bid. Since then, its stake is down roughly $500m, according to estimates by BNP Paribas, and if Glencore walks away Xstrata shares will take another hit. You could argue that thermal coal and other commodities prices will recover over time, but the 38-year-old Mr Al-Sayed knows he is losing money. In a year's time Qatar Holding could find itself wishing that it had accepted Glencore's offer of 2.8 shares. Today, Qatar's 11 per cent is, in effect, enough to block a deal. But if Xstrata shares plunge, Glencore could return with a direct takeover, which only requires the support of a majority, rather than the current scheme of arrangement which requires almost unanimous support. Glencore is likely to have the firepower to raise the offer a tad, perhaps to 2.90-2.95 shares. But anything starting with a number three looks a stretch. Qatar may lower its ambition a little, say 3.15, but not all the way to accept an offer starting with a number two. Arbitrage hedge funds believe the deal could happen at 3.00-3.05 shares. From what I hear, both sides are a long way from that right now. But the game is just starting.