Glencore, Xstrata merger close but not everybody's happy

Xstrata takeover by commodities giant Glencore

Xstrata takeover by commodities giant Glencore
Ivan Glasenberg

Shareholders in miner Xstrata, a major shareholder in Lonmin, have given the go ahead  to a long-awaited $31-billion takeover by commodities giant Glencore , paving the way for one of the largest tie-ups in the sector to date.

The merger followed nine months of tense negotiations and is reported to be a personal victory for Glencore's biggest shareholder, key dealmaker and chief executive, Ivan Glasenberg, who will also lead the combined group.

But Mick Davis, CEO of Xstrata, said a shareholder decision to vote down retention salaries for key Xstrata staff ahead of the merger 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. Apperently payouts to individuals however talented, have become increasingly unpopular as the drop in global demand for commodities and sad economic outlook continues.

Some Xtrata executives have indicated they may leave the new entity. 

The deal has been dragged back from the brink of collapse on more than one occasion since it was first proposed in February - most recently in September, when Glencore was forced to improve its offer to woo Xstrata's second-largest shareholder, Qatar.

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 statementtoday

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.

The merger is subject to approval by the EU.

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