Xstrata chairman quits over bonuses veto as Glencore tie-up agreed

 

Sir John Bond dramatically resigned as chairman of Xstrata yesterday after investors backed the miner's proposed £56bn merger with Glencore but voted overwhelmingly to oppose £140m of retention bonuses he had sought to tie into the deal.

Sir John fell on his sword just half an hour after Xstrata revealed that 78 per cent of its shareholders had opposed the retention bonuses lined up for 70 of his staff, which he had insisted were key to the success of the enlarged group once the merger was completed.

Including abstentions, about 87 per cent of Xstrata's shareholders failed to back the controversial bonuses, which Sir John had initially said were so important that he made the deal contingent upon their approval. Furthermore, the original deal stipulated that the bonuses would not be linked to performance in any way, and were to be paid in cash.

In the first sign that the writing could be on the wall for Sir John, the former chairman of HSBC, the make-up of the bonuses was later switched to shares and a performance-related element was introduced after a chorus of opposition from shareholders.

"In the light of shareholders' decision not to support the board's recommendation, I have informed the Xstrata board to commence an orderly process to appoint a new independent chairman of Glencore Xstrata," he said.

David Rough, Xstrata's deputy chairman and senior independent director, was also fighting for his job yesterday as the City put the entire board under the spotlight.

Tom Gidley-Kitchin, an analyst at Charles Stanley, said: "People are extremely disappointed in David Rough, and he is now in a difficult position." Jane Coffey, head of equities at 0.5 per cent shareholder Royal London Asset Management, said: "We would have expected resignations. The retention package overcomplicated the whole deal and Xstrata initially failed to negotiate the best deal it could for its shareholders, even though it said the original offer was the best it could have negotiated."

In a further embarrassment for Sir John, in September Glencore raised the offer he had enthusiastically agreed on behalf of Xstrata in February, after a barrage of opposition from shareholders such as Qatar, which has a 12 per cent stake. Glencore originally offered Xstrata investors 2.8 of its shares for each one of theirs, but increased the ratio to 3.05.

The new deal also saw Sir John perform a further climbdown, as he dropped the bonuses as a condition for consummating the deal.

Xstrata and Glencore now need clearance from regulators. European competition regulators are due to announce by Thursday whether they will clear the deal, potentially with divestments, or begin a longer inquiry. It is thought to be looking most closely at the European zinc market, where the companies have a 50 per cent share. South Africa and China also need to clear the deal, although neither country has given a deadline.

If concluded, the merger would create a mining and commodities trader that encompasses Xstrata's coal, nickel, zinc and copper mines and Glencore's cotton-to-oil trading empire. In yesterday's complex three-part shareholder ballot, 78.8 per cent of Xstrata investors voted to approve the merger without the retention bonuses, while a motion backing the merger with the bonuses – which needed 75 per cent approval – only secured 68 per cent. The final vote, on just the retention bonuses, was rejected, leaving the deal approved but without the payouts.

Xstrata's shares added 29.8p to 986.6p while Glencore's increased by 5.15p to 331.75p.

Rocky road: How mega-deal was carved out

7 February Glencore and Xstrata agree an all-share merger to create a commodities powerhouse, offering 2.8 Glencore shares for every Xstrata one.

9 April Qatar's sovereign wealth fund starts building up it stake in Xstrata, initially past 5 per cent then past 10 per cent in June.

31 May The companies detail the deal, including a retention package worth millions for Xstrata's chief executive, Mick Davis, and other key managers. He was to stay on as chief executive of the new group, with Glencore's CEO, Ivan Glasenberg, as deputy chief executive.

26 June Qatar demands better terms, asking for 3.25 new Glencore shares for every Xstrata share.

7 September After late-night talks that end just hours before shareholders are to vote on the deal, Glencore raises its offer to 3.05 shares. Mr Davis will now leave, and Mr Glasenberg will head the group.

15 November Qatar says it will vote for the takeover but will abstain from voting on the multimillion-pound management retention plan.

20 November Investors pass the deal but vote down the pay plan.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
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?