Qatari threat to £57bn merger of Xstrata and Glencore

Anger continues over £170m retention bonuses for executives at mining giant

Qatar threatened to scupper the proposed £57bn mega-merger between the mining and commodity giants Glencore and Xstrata last night unless the terms of the deal were improved for shareholders.

The Arab emirate's sovereign wealth fund, which is the second-largest shareholder in Xstrata after Glencore, unexpectedly said that "whilst it sees merit in the a combination of the two companies, it is seeking improved merger terms".

Glencore is currently offering 2.8 of its shares for each Xstrata share, but the Qataris said 3.25 Glencore shares per Xstrata share would be "more appropriate".

Shareholders will get to vote on the merger on 12 July. However, opposition from just 25 per cent of investors will be enough to halt the deal, since it has been set up as a scheme of arrangement, requiring the backing of three-quarters of the investors.

This means Qatar's 11 per cent stake could provide decisive to the merger actually happening. Because Glencore already owns 34 per cent of Xstrata and will be unable to vote on its holding, only 16.4 per cent of Xstrata's shareholders need to vote against the deal to block it.

The sovereign wealth fund's opposition came as the two companies were preparing to bow to investor pressure over controversial plans to pay key executives £170m just to keep them at the combined business if the deal goes through.

The companies have come under increasing pressure to rethink the retention packages from investors such as Standard Life and Fidelity, as well as the Association of British Insurers, the shareholder advisory group whose members own about 17 per cent of the UK stock market.

Xstrata and Glencore have made the merger contingent upon these so-called retention packages, which would pay Xstrata's chief executive, Mick Davis, £29m for running the group for three years after the merger is finalised, irrespective of the new comnpany's performance.

Although they are expected to stop short of scrapping the payments, the companies are discussing a range of options to appease shareholders. Under the most likely scenario, they would link the payments to performance in some way. However, no final decision had been made last night and it was still possible the companies could decide against making any changes.

On Monday, Standard Life's head of UK equities, David Cumming, turned up the pressure when he said shareholder hostility to the payments meant the merger was now "in jeopardy" and could mean that Mr Davis would have to step down.

"The problem is anyone voting in favour of this plan is voting to kill the 'Shareholder Spring' stone dead and, to be honest, will destroy any credibility they have in the governance arena, so I don't think there's going to be any more supporters. On that basis the deal is in jeopardy," Mr Cumming told the BBC.

"I think to preserve the integrity of the board … they're almost going to have to hand over to Glencore, make it a takeover rather than a merger, and that might involve Mick Davis actually standing down," Mr Cumming added.

Xstrata and Glencore declined to comment last night.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
The Doctor and Clara have their first real heart to heart since he regenerated in 'Deep Breath'
TV
Life and Style
Apple showed no sign of losing its talent for product launches with the new, slightly larger iPhone 6 making headlines
techSecurity breaches and overhyped start-ups dominated a year in which very little changed (save the size of your phone)
Arts and Entertainment
Jamie Oliver
filmTV chef Jamie Oliver turned down role in The Hobbit
News
The official police photograph of Dustin Diamond taken after he was arrested in Wisconsin
peopleDownfall of the TV star charged with bar stabbing
PROMOTED VIDEO
Arts and Entertainment
Jeremy Clarkson, left, and Richard Hammond upset the locals in South America
tvReview: Top Gear team flee Patagonia as Christmas special reaches its climax in the style of Butch and Sundance
News
people
Sport
Ashley Barnes of Burnley scores their second goal
footballMan City vs Burnley match report
Arts and Entertainment
Peter Mayhew as Chewbacca alongside Harrison Ford's Han Solo in 'Star Wars'
film
News
i100
Arts and Entertainment
Man of action: Christian Bale stars in Exodus: Gods and Kings
film
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Arts and Entertainment
Tracy Emin's 1998 piece 'My Bed' on display at Christie's
artOne expert claims she did not
News
Ernesto Che Guevara and Fidel Castro, right, met at Havana Golf Club in 1962 to mock the game
newsFidel Castro ridiculed the game – but now investment in leisure resort projects is welcome
News
Hackers revealed Oscar-winning actress Lawrence was paid less than her male co-stars in American Hustle
people
Arts and Entertainment
Clueless? Locked-door mysteries are the ultimate manifestation of the cerebral detective story
booksAs a new collection of the genre’s best is published, its editor explains the rules of engagement
Sport
Robin van Persie is blocked by Hugo Lloris
footballTottenham vs Manchester United match report
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

Selby Jennings: Quantitative Research | Equity | New York

Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

Selby Jennings: SVP Model Validation

Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

Day In a Page

A timely reminder of the bloody anniversary we all forgot

A timely reminder of the bloody anniversary we all forgot

Who remembers that this week we enter the 150th anniversary year of the end of the American Civil War, asks Robert Fisk
Homeless Veterans appeal: Former soldiers pay their respects to a friend who also served

Homeless Veterans appeal

Former soldiers pay their respects to a friend who also served
Downfall of Dustin 'Screech' Diamond, the 'Saved By The Bell' star charged with bar stabbing

Scarred by the bell

The downfall of the TV star charged with bar stabbing
Why 2014 was a year of technological let-downs

Why 2014 was a year of technological let-downs

Security breaches and overhyped start-ups dominated a year in which very little changed (save the size of your phone)
Cuba's golf revolution: But will the revolutionary nation take 'bourgeois' game to its heart?

Will revolutionary Cuba take 'bourgeois' golf to its heart?

Fidel Castro ridiculed the game – but now investment in leisure resort projects is welcome
The Locked Room Mysteries: As a new collection of the genre’s best is published, its editor Otto Penzler explains the rules of engagement

The Locked Room Mysteries

As a new collection of the genre’s best is published, its editor explains the rules of engagement
Amy Adams on playing painter Margaret Keane in Tim Burton's Big Eyes

How I made myself Keane

Amy Adams hadn’t wanted to take the role of artist Margaret Keane, because she’d had enough of playing victims. But then she had a daughter, and saw the painter in a new light
Ed Richards: Parting view of Ofcom chief. . . we hate jokes on the disabled

Parting view of Ofcom chief... we hate jokes on the disabled

Bad language once got TV viewers irate, inciting calls to broadcasting switchboards. But now there is a worse offender, says retiring head of the media watchdog, Ed Richards
A look back at fashion in 2014: Wear in review

Wear in review

A look back at fashion in 2014
Ian Herbert: My 10 hopes for sport in 2015. Might just one of them happen?

Ian Herbert: My 10 hopes for sport in 2015

Might just one of them happen?
War with Isis: The West needs more than a White Knight

The West needs more than a White Knight

Despite billions spent on weapons, the US has not been able to counter Isis's gruesome tactics, says Patrick Cockburn
Return to Helmand: Private Davey Graham recalls the day he was shot by the Taliban

'The day I was shot by the Taliban'

Private Davey Graham was shot five times during an ambush in 2007 - it was the first, controversial photograph to show the dangers our soldiers faced in Helmand province
Revealed: the best and worst airlines for delays

Revealed: the best and worst airlines for delays

Many flyers are failing to claim compensation to which they are entitled, a new survey has found
The stories that defined 2014: From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions

The stories that defined 2014

From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions
Stoke-on-Trent becomes first British city to be classified as 'disaster resilient' by the United Nations

Disaster looming? Now you know where to head...

Which British city has become the first to be awarded special 'resilience' status by the UN?