[miningmx.com] – MICK Davis, CEO of Xstrata, said a shareholder decision to vote down retention salaries for key Xstrata staff ahead of a $44bn merger with Glencore introduced “unnecessary risks” into the combined group.
The merger was voted through, but 78.5% of shareholders did not support retention packages which carry a total value of £144m. The deal structure was adjusted earlier this year effectively decoupling the proposed merger, which shareholders supported once an adjusted premium had been proposed, from executive bonuses.
Payouts to individuals, however talented, have become increasingly unpopular amid a pallid economic outlook for many developed economies.
An earlier proposal to pay Davis a significant bonus had been earlier removed from the terms of the merger. Davis subsequently said he would leave the combined company after seeing it through an initial six month teething period.
“I regret the decision of shareholders not to approve these retention arrangements for the members of my senior and operational management deemed crucial to the success of the combined group as, in my view, this introduces unnecessary risks to the merged company’s future value proposition,” Davis said in a statement today.
Davis added, however, that shareholders had spoken clearly and he respected the decision. “The corporate culture, values and world-class portfolio of assets and growth projects we have developed over that time are a source of pride and will make a significant contribution to the combined company,” he said.
However, in perhaps the first of a string of senior resignations by Xstrata executives, Sir John Bond, Xstrata’s chairperson, said he would instruct the company to begin the search for his replacement, once the merger had been approved.
“In the light of shareholders’ decision not to support the board’s recommendation, I have informed the Xstrata board, and Glencore’s current chairman that, once the merger has completed, I intend to instruct the board to commence an orderly process to appoint a new independent chairman of Glencore Xstrata,’ he said.
The transaction is not yet a certainty as it must clear regulatory hurdles posed by the European Union’s anti-trust commission, with a decision due on November 22, and regulatory authorities in China and South Africa.
Glencore has the option of allowing the transaction to lapse should the European Commission investigate the merger.
“We expect these approvals to be secured, albeit probably with more remedies than anticipated by Glencore (we think potential disposal of zinc smelting operations and/or end to the zinc off take agreement with Nyrstar),” said stockbroker SG Metals in a note on November 20.