Xstrata's 'Big Mick': no stay-on bonus brings 'unnecessary risks'
South African mining blog Miningmx reports Xstrata CEO Mick Davis said today that shareholders' decision to vote down a retention package for key executives of the diversified miner ahead of the tie-up with Glencore International poses "unnecessary risks" for the merged entity.
While the merger is a done deal, Xstrata's shareholders rejected the controversial retention bonus plan – which would have seen senior management receive a total of more $220 million just for staying on – by a resounding 78.4%.
“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, adding that he nevertheless 'respects' the decision.
Davis is scheduled to leave Glencore Xstrata International Plc – the official name of the new company – after an initial six-month period ironing out the details of the integration of the two Swiss-based giants.
Sir John Bond, Xstrata’s chairperson, has also communicated his departure in light of the voting down of the retention fees which his board recommended.
When the deal was announced in February Glencore was offering 2.8 shares for every one of Xstrata, but in September Glencore CEO and largest shareholder with more than 15%, Ivan Glasenberg, relented under pressure from Qatar and other major shareholders and upped the offer roughly 9% to 3.05.
At the same time Davis gave up a portion of the retention payout he would have received, but as part of the revised offer it was decided Glasenberg, and not Davis, would lead the combined company.
Analysts quoted by FT.com believe the deal will close in early 2013, with consent from China’s Ministry of Commerce and authorities in South Africa still pending.