Glencore-Xstrata: just another notch on Qatar's bedpost

Qatar making tracks through Europe's businesses.

A street in Doha, Qatar. Photograph: Getty Images.

Sainsbury's, Harrods, Barclays Bank, Total and Paris-Saint-Germain FC – what do all these well-known European businesses have in common? They are all wholly or partly owned by Qatari investors.

The long running discussions concerning the multibillion dollar Glencore-Xstrata super commodities merger are just the latest example highlighting Qatar’s ever expanding worldwide influence.

Qatar Holding, Xstrata’s second-largest shareholder, is asking the Swiss firm Glencore for 3.25 shares to each Xstrata share to sign off the deal and pledge it will not accept Glencore' lower bid at 2.8. This fusion will create an industry giant. A herculean company whose revenues are estimated to be around $175bn.

In 2008, at the height of the banking crisis, Qatar Investment Authority offered two capital raisings to Barclay’s. The bank secured $4.5bn from Qatar in 2008 and another £7.1 bn from Qatar, Abu Dhabi and other shareholders in late 2008 – a deal that has since been scrutinized by UK and US regulators.

Another British-based buy (or Triple B) for Doha is the now open-to-business Shard, the 72-storey high building everyone else avoided investing in during the financial troubles in 2009. As for today, it owns 95 per cent of it, and sent the prime minister of Qatar, Sheikh Hamad bid Jassim bin Jabor Al Thani to the laser-filled opening ceremony in July.

This kind of attention is not new, as Qatar’s sovereign wealth fund, Qatar Investment Authority (QIA) and Qatar Holding (a QIA subsidiary) – part of its sovereign wealth fund worth $70bn - have increasingly appeared at the centre of colossal overseas investments and deals.

The resource-rich country wants to invest in non-oil industries as it seeks to diversify its investment base. In 2012 alone it is expected to splurge $30bn on foreign assets.

Everything about Qatar is a reminder of its new power, and its “rags to riches” story. The country was once one of the poorest Gulf states, a nation mainly distinguished for its pearling industry.

With the discovery of enormous oil and natural gas resources in the 1940s the 300,000 Qataris saw their small country (Yorkshire has approximately the same size) become the one with the world highest GDP per capita. It now sits at $92,501, according to the World Bank.

But buying into European banks, economies or prestigious real estate projects didn’t stop there.  Qatar Sports Investments have been on a spending spree with some of the biggest European football names, acquiring Paris-Saint-Germain FC in 2012, becoming the club’s 70 per cent shareholders. And adding the nickname of “Manchester City of Paris” to the club, in reference to Abu Dhabi’s purchase of Manchester City, made by Sheikh Mansour bin Zayed bin Sultan Al Nahyan, a member of the Abu Dhabi royal family.

This month, Qatar was reported to have made yet another investment plan in France. But surprisingly this time, it was not about an additional football club. It’s a €50m in France’s poorest neighbourhoods, the “banlieues”. The investment, as the French media reported it, is to promote economic activity in those areas where unemployment rates are often above 40 per cent.

Predictions about Qatar’s next investment are widespread. Will it be another European financial institution or infrastructure company? Maybe might just be another football club.

Elsa Buchanan writes for VRL Financial News.