Glencore faces tough task bidding for miner ENRC

By Rob Davies for the Daily Mail
Updated: 16:42 EDT, 13 June 2011

Tough: Glencore would face an uphill struggle to take over miner ENRC , key sources said, despite rumours of a £12bn bid in the offing

Glencore would face an uphill struggle to take over miner ENRC , key sources said, despite rumours of a £12bn bid in the offing.

Takeover speculation led ENRC ’s stock 34.5p higher to 776.50p, recouping losses caused by a boardroom purge which saw non-executives Sir Richard Sykes and Ken Olisa ousted by the firm’s shareholders.

But sources close to Glencore pointed out that any bid would require the firm to issue new shares to pay for it.

Glencore (up 14p to 523.40p) is barred from issuing any new equity for at least six months from the date of its record £7bn float. Axed non-executive Olisa agreed that a takeover was unlikely given the presence of the Kazakh government on ENRC ’s shareholder register.

He said: ‘The Glencore issue depends entirely on the Kazakhstan government who, from my experience of the last three years, want to keep control of their natural resources.That militates against a buyout unless, of course, Glencore have promised Kazakhstan something big in return.’

The extent of the autocratic Kazakh government’s influence over the company has come to a head during the boardroom civil war and has prompted calls for greater action from regulators.

Robin Johnson, partner at law firm Eversheds, said something should be done about companies which recruit well-known City names to improve their image.

He said: ‘They put grandees on the board, the float gets away and then they’re taken off again if they don’t agree with management. ‘We’ve got to deal with that issue.’

Peter Montagnon, spokesman for the Financial Reporting Council, said ENRC ’s dismal share price performance prior to the bid talk ‘shows there is a relationship between governance and value’.