London, England — 21 November 2012 – Global miner Xstrata’s CEO Mick Davis says a shareholder decision to vote down retention salaries for key Xstrata staff ahead of a US$31 billion merger with Glencore introduces unnecessary risks into the combined group.
Miningmx reports that the merger was voted through yesterday, but 78.5% of shareholders did not support retention packages which carry a total value of US$230 million. 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 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.
He 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, Xstrata chairperson Sir John Bond 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 been completed, I intend to instruct the board to commence an orderly process to appoint a new independent chairman of Glencore Xstrata,” he said.
The merger is not yet a certainty as it must clear regulatory hurdles posed by the European Union’s anti-trust commission, with a decision due tomorrow, 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 an end to the zinc off- take agreement with Nyrstar),” said stockbroker SG Metals in a note on November 20.
Source: Miningmx. For more information, click here.