James Moore: There's more work to be done yet on this deal

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The Independent Online

Will the marriage of Xstrata and Glencore ever be consummated? Not if Standard Life and Schroders get their way. The mega-deal between the two resources giants might have the City beside itself with excitement but it didn't stop the latter two from playing party-poopers yesterday. They're not at all happy with the dowry for Xstrata, the bride.

Their threat to vote down the deal probably makes them about as popular as used sub-prime mortgages in financial circles. An awful lot of people have been invited to a very expensive wedding party.

But Standard and Schroders say they don't think that Xstrata's shareholders are getting enough.

It used to be the case that a deal would be announced and an extraordinary general meeting called before institutional shareholders would dutifully send in their yes votes.

At long last this is changing. In the past couple of years investors have torpedoed Prudential's vainglorious bid for Asian insurer AIA before moving on to steal away the attempt by security services group G4S to buy Danish facilities management company ISS. Standard and Schroders still need others' help to do that here. But Glencore can't vote its shareholding in Xstrata so only 16 per cent of the shareholders need to be in the "no" camp (the merger is being accomplished via a scheme of arrangement requiring 75 per cent support).

The activism is welcome. Deals tend to be much better for the City than they are for shareholders, who suffer the financial consequences of their all-too-frequent failure.

And with close scrutiny being paid to the institutions' tepid response to ever more outrageous executive pay settlements, perhaps it shouldn't surprise us. Institutions seem finally to have realised that they are going to have to take their role as "stewards" of the companies they own seriously.

If the deal does go through (and there are still regulators to worry about), the two fund managers might like to return to the issue of pay.

Xstrata's chief executive Mick Davis and Glencore boss Ivan Glasenberg, soon to be his co-chief executive, sorry deputy, are being promised barnstorming packages to "incentivise" them to make the deal they have created and seem to want as much as anyone work. Given that they, too, will be big shareholders in the combined group, shouldn't that be incentive enough? It's a question investors should be asking.

* There's still a big oil spill on BP's road to recovery. BP is back on the right path, at least in the view of American chief executive Bob Dudley, who had the City gushing over his figures like he hopes the 12 new exploration wells BP will dig this year will be gushing with oil.