MINING GROUP Xstrata gave its long-awaited blessing yesterday to a revised $33 billion bid from trader Glencore, bowing to investor pressure by changing the deal to ensure it is not sunk by a payment plan to retain top managers.
Xstrata dropped its insistence that the overall deal be tied to a shareholders’ vote on the controversial package, which offers over 70 top executives a total of roughly £140 million to dissuade them from quitting.
Now, through a complex structure of votes, investors will be able to express views against the retention plan without endangering the merger, bringing the deal closer to a conclusion almost eight months after it was announced.
In the original all-share agreement, backed by Xstrata’s board in February, shareholders had to support both the retention plan, then worth more than 170 million pounds, and the Glencore offer itself – or neither.
Xstrata argued its executives would be responsible for achieving the bulk of future profit. The board members later said changes to Glencore’s bid last month – which put the trader’s own chief executive at the helm instead of Xstrata’s veteran boss Mick Davis – made the plan even more necessary to stop its top executives leaving.
But after months of public and private grumbling from institutional shareholders such as BlackRock, Legal General and Schroders, Xstrata has agreed to split the issues.
For some shareholders, this is still not enough – Threadneedle Investments, the 25th largest shareholder in Xstrata, said even Glencores revised, higher deal was giving away the miner “on the cheap” and it remained “firmly opposed”.
Threadneedle holds 0.4 per cent of Xstrata stock, but in a complex deal that could still be blocked by shareholders accounting for just 16.5 per cent of shares, every vote counts.
“No one should be in any doubt that this is effectively seen as a takeover, which will ultimately see a significant change in culture, leadership, quality and risk profile for Xstrata shareholders,” Iain Richards, head of governance and responsible investment at Threadneedle, said in a letter to Xstrata’s board. – (Reuters)
