What If the Wolf Is Already Inside the Door?

The great food writer M.F.K. Fisher once wrote a book titled “How To Cook a Wolf.” One caveat it might have had: when the wolf invites you to dinner, it’s not usually the wolf that gets eaten.

A story today bring to mind the position of the wolf in the culinary order. It chronicles the latest turn in the Glencore-Xstrata merger story. Having raised the price he’s willing to pay for Xstrata, Glencore’s Ivan Glasenberg secured the backing of Xstrata’s board for the deal to go through, creating a $70 billion mining behemoth.

Terms here are byzantine enough to give delight to any connoisseur or corporate intrigue. The original deal would have placed Xstrata chief executive Mick Davis in control of the combined company for a period of several years. The new deal makes him a short term interim CEO, with Glasenberg taking over in six months. The twist is that the majority of board seats in the combined company will go to executives and shareholders of Xstrata.

Really? Glasenberg agreed to up his offer and pay a premium for Xstrata. And the basic rule in these things is that whoever pays gets to run the shop. If the merger is finalized, as it now likely will, we’ll get to see just how that board split will work out.

All this brings us back to that point about wolves. In these kinds of deals, you should generally bet on the wolf coming out on top. That can happen in abrupt and ugly ways; note the amazing recent story of the Duke Energy Corp.-Progress Energy Inc., in which Progress chief Bill Johnson was elected and removed as chief executive in a space of two hours , to be replaced by Duke’s James Rogers.

In the Glencore-Xstrata merger, whatever the composition of the board, it sure looks like Glencore’s Glasenberg is the wolf.


A version of this post appeared earlier in the Market Now newsletter. Click here to register at Bloomberg.com and subscribe to The Market Now daily email.

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