CAPITAL MARKETS

Bond out as Glenstrata created

XSTRATA boss Mick Davis is not the only one leaving the company after the merger with Glencore International, with chairman Sir John Bond vowing to join him after shareholders rejected the contentious retention payments.

Kristie Batten
Bond out as Glenstrata created

The $A51 billion merger was overwhelmingly approved by shareholders of both companies, but the resolution on £140 million ($A214.6 million) in retention payments for Xstrata’s senior management was rejected.

The retention plan was originally the centre of the deal, but in early September, Glencore revised the offer and separated the resolutions after many shareholders expressed outrage over the generous payments.

Bond was set to chair the combined group, but in the wake of the 78% vote against the retention payments, he announced he would resign in the best interests of the company.

“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.

Xstrata chief executive Mick Davis will lead the new entity for six months before being replaced by Glencore CEO Ivan Glasenberg.

Davis said Xstrata’s people would be a critical element to the merged company’s success.

“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,” he said.

“Shareholders, however, have spoken clearly and we respect their views.”

The merger may have crossed its biggest hurdle but it cannot be finalised until approvals are received by European, Chinese and South African regulatory authorities.

The deal, which was first announced in February, is the biggest mining transaction since Rio Tinto’s $US38.1 billion acquisition of Alcan in 2007.

Macquarie’s Jeff Largey initiated coverage on Glencore with an outperform, saying that the company’s existing appeal was enhanced by the Xstrata merger.

He expects the merged entity to be active in the merger and acquisition space with up to $US18 billion of balance sheet headroom for M&A deals by 2014.

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