Xstrata prepared to pay £29m to hang on to Davis

Click to follow
The Independent Online

After months of speculation, the mining and commodity giants Xstrata and Glencore has finally revealed just how much they want to keep Mick Davis running the combined show following their merger – £28.8m.

That is the amount Xstrata's chief executive Mr Davis is being paid simply to stay as the head of the newly merged entity for three years if the £57bn deal is completed.

The company is paying out more than £170m in total to retain 73 key staff, with managers other than Mr Davis being offered two-year retention deals. The figures emerged as part of the prospectus detailing the merger that was sent to all shareholders yesterday.

The sheer size of the payment will fuel speculation that the deal may fail to receive the shareholder backing it needs at the extraordinary meeting next month. "Details of the retention package may prove to be controversial amid heightened sensitivity over pay and performance... the deal has a realistic chance of failing," analysts from Jefferies Group said in a note.

But Xstrata insisted the payments are key to the success of the merger, which will create a mining and commodities powerhouse ranking as the world's fourth biggest miner after BHP Billiton, Rio Tinto and Brazil's Vale.

"These arrangements depend upon retaining the core senior management of Xstrata, given that more than 80 percent of the combined group's income will be derived from its operating assets, and are the reason why the retentions were provided for as part of the transaction," the company said.

Mr Davis is already one of the best-paid FTSE 100 chief executives, taking home $5.4m last year in salary, cash bonus and benefits. This excludes long-term incentives, deferred bonuses and retirement benefits.

Having led Xstrata for a decade, Mr Davis has transformed the company from a $500m coal miner to a diversified miner worth about £27bn, and is seen as a steady hand by his company's shareholders.