- By Region
Sir John Bond, the chairman of Xstrata, and David Rough, the miner’s senior independent director, will meet shareholders over the next two weeks to attempt to head-off protests over the £217m in retention payments to Mick Davis and his senior management under the merger with Glencore.
The roadshow, which was planned before Thursday’s release of the deal documents, will give shareholders a chance to voice their concerns over the £29m awarded to Mr Davis, chief executive of Xstrata.
The payout, which comes over three years in a mixture of cash and shares, does not require the chief executive to meet performance thresholds – a particular bone of contention for investors.
Xstrata said on Thursday that the £217m in retention awards and other contractual payouts would be split between 73 of the miner’s senior staff, arguing that keeping key people was crucial to the success of the combined company.
Xstrata and Glencore expect to find $500m a year in cost savings and revenue benefits from their combination.
Sir John said in a letter to investors that stability in the company’s senior management team “has been integral to Xstrata’s success over a decade”. He added that failing to retain key personnel would mean that the deal “would cease to be a merger in which Xstrata shareholders’ interests would be adequately represented”.
The pay arrangements will be put to a shareholder vote in July, with Xstrata needing to win the support of more than half of investors voting. If the pay schemes are voted down, the merger will not go ahead.
Some investors reacted angrily to the pay plans. Fidelity, the fund manager, said the arrangements were “provocative and insensitive given the current climate”.
Tensions are running high among UK investors after a series of shareholder rebellions over remuneration in recent weeks forced the departure of some prominent chief executives.
People familiar with the matter said that other institutional fund managers had privately said they felt unable to support the proposed pay packages given the heightened debate around executive pay and corporate governance.
But analysts at Liberum said they doubted that enough investors would risk derailing the deal over the payouts, arguing that the likely fall in Xstrata’s share price would outweigh their concerns.
“Rather than commit financial hara-kiri, recent Xstrata shareholder behaviour suggests dissenters are more likely to sell ahead of the vote, with precedents suggesting sales to supporters of the deal,” they said.
Investors including Standard Life who had previously objected to the terms of the deal, which offers Xstrata investors 2.8 Glencore shares for each share they own, reiterated their opposition.