Qatar Holding's shock rebuff of Glencore's offer in its $30 billion takeover bid for miner Xstrata indicates a new, muscular stance by the sovereign fund which had long been content to be the quiet investor in its big-name portfolio.
Late Tuesday, Qatar, Xstrata's second largest shareholder and a potential kingmaker for the deal, said Glencore should pay 3.25 of its shares per Xstrata share, rather than the 2.8 on offer.
The 11th hour move will make it difficult for Glencore and Xstrata to push the merger through on current terms, several sources close to the deal said, leaving only until Thursday evening for Glencore to sweeten the deal or be forced to delay shareholder meetings scheduled for mid-July.
"This is probably the first time they (Qatar) have taken such a stance on a high-profile deal. To me, it clearly shows the evolution of the fund from being a quiet investor to an investment force to be reckoned with," a senior Dubai-based banker said, speaking on condition of anonymity due to business links with the fund.
Qatar Holding, the investment arm of Qatar Investment Authority (QIA), has been building up its stake of around 11 percent in Xstrata since February.
In a rare April media briefing, QIA executive board member Hussain al-Abdulla repeatedly dodged a question about the stake increase, saying he was "legally advised" not to speak.
It halted its buying in June, but not before amassing a position worth nearly $4 billion at current market prices. That makes Qatar's role vital as Glencore's bid needs approval from 75 percent of Xstrata shareholder, excluding its own 34 percent holding.
"Looking back, all this stake building seems now to be part of a clear strategy. A strategy to increase the stake and go to Glencore and say, 'give us better terms or you won't see this merger through'," said a second banking source who has advised the fund.
Glencore is expected to sweeten its bid in order to seal the deal and said on Wednesday it would consider a proposal from the board of Xstrata in relation to certain amendments to the management incentive arrangements that were proposed as part of the deal.
For those who have tracked and advised the fund on some of its most high-profile deals since inception, the move signals the fund's growing role as an international investor not afraid of taking a strong stand in large deals.
With stakes in such high-profile names ranging from German sports car maker Porsche, luxury goods house LVMH to British bank Barclays, the fund has clearly built a reputation as one of the most aggressive investors around.
It has publicly expressed interest for commodity investments and sits on an annual investment budget of between $30 billion to $40 billion every year.
"How many investors in the world today have $30 billion to spend each year? When you are potentially showed every asset put on the block globally, you can afford to be picky and demanding," said the second banking source said.
However, not many expect the fund to take up an activist investor role in the future mainly to avoid political backlash and its lack of management expertise to run companies.
"I would expect the fund to be opportunistic going forward. They are not interested in running companies they own and do not have the management expertise for it," the first banking source said.