Mining mega-merger agreed

Shareholders in mining giant Xstrata have voted in favour of being taken over by commodities trader Glencore. The tie-up is the mining sector’s largest ever, creating a group with a market capitalisation of $70bn. However, shareholders rejected a plan to pay 70 Xstrata managers £140m to retain their services after the merger. Following this defeat for Xstrata’s board, chairman Sir John Bond resigned.

What the commentators said

Back in February, when Glencore’s bid was revealed, the merger seemed logical. “It promised a combination that would reshape the natural resources sector,” said Helen Thomas in the FT: “a colossus in copper, coal, and zinc production with spades of global trading nous”.

But the deal was overshadowed by a protracted row over golden handcuffs for Xstrata managers. Shareholders have decided that “they are not as key to the enlarged group’s success as [Xstrata’s board] blithely assumed”, said the FT’s Lex.

The board “failed to recognise” investors’ concerns, noted Andrew Peaple in The Wall Street Journal. “With huge insensitivity,” it at first proposed a £170m retention package with no performance measures attached – despite institutional investors’ growing irritation with unjustified executive pay.

Xstrata certainly “did not make a credible case for the incentives”, added Ian King in The Times. It failed to get Glencore to sweeten its takeover terms at the outset. And then it could only watch as Qatar Holding, Xstrata’s second-biggest shareholder, began to apply pressure, and Glencore became more generous.

Hopefully other boards will take note of this pay revolt, said James Moore in The Independent. It marks a “small outbreak of sanity” in the City.


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