Xstrata has bowed to pressure from angry shareholders over its proposed mining-commodities mega-merger with Glencore and significantly changed controversial plans to pay key executives £170m just to keep them at the combined group if the deal goes through.
As Xstrata unveiled the new-look retention packages yesterday, Glencore was in a meeting with Qatar's sovereign wealth fund, battling to save the deal, The Arab emirate, which owns 11 per cent of Xstrata, made a surprise public announcement on Tuesday night that the acquisition price was too low. Glencore is offering 2.8 of its shares for each Xstrata share, but the Qataris said 3.25 would be "more appropriate".
In a significant climbdown, Xstrata yesterday made two key changes to the so-called retention payments, which would have handed its chief executive Mick Davis £29m in cash to run the company for three years, irrespective of its performance. Xstrata and Glencore have made the £57bn deal contingent on the retention packages being voted through by its shareholders.
Under the revised terms, Xstrata pledged to make the payments in shares rather than cash, giving the top 73 executives a greater stake in the performance of the company following the merger.
Dangling a further carrot to shareholders, who have become extremely frustrated at what they see as blatant greed on the part of Xstrata, the company said it would now link the payments to performance.
For the executives to be eligible for the full £170m, the group must cut an extra $300m (£192m) of costs in the two years after the deal, which it plans to do by consolidating areas such as transport, distribution and catering.
These will be on top of the $450m of annual cost savings the companies believe they can make by combining their sales and marketing operations.
Sir John Bond, Xstrata's chairman, said the company was "sensitive to the perspective and concerns of our shareholders in the current environment and we have listened to the feedback we have received since publishing the merger documents."
However, early indications are that the changes to the retention packages may not be enough when shareholders come to vote on the deal on 12 July.
Schroders' head of UK equities, Richard Buxton, said: "Three cheers for the Qataris. We've said all along that the ratio was wrong so they've either now got to improve the terms or see this deal get voted down." .
Shareholders such as Schroders, Standard Life, and Fidelity have already condemned the retention payments.
Shares in Glencore fell 1.45 per cent to 298.3p yesterday while Xstrata gained 1.4 per cent to 796.6p.
Bribery case: Glencore guilty
If yesterday wasn't already eventful enough for Glencore, a Belgian court convicted a subsidiary of the commodities trader of bribing a European Union official in return for market sensitive information.
In the ruling Judge Pierre Hendrickx found subsidiary company Glencore Grain Rotterdam guilty of paying the mobile phone bills and laying on a French holiday to secure information about grain subsidies. He fined the unit €500,000. Meanwhile, Karel Brus, a former EU agriculture department official, was sentenced to 40 months in jail. Mr Brus accepted a holiday to the south of France in 2003, while Glencore also paid €20,000 worth of phone bills for him in 2002 and 2003.
On receiving the judgment Mr Brus, dressed in a crumpled grey jacket and a light shirt, bowed his head and stared at the floor.
A Glencore spokesman said: "We are considering our position".
The court also convicted some other companies and individuals, including the French agricultural cooperative Union Invivo, of providing or facilitating bribes. "The holiday offered by Glencore Grain Rotterdam to Karel Brus in the South of France in June 2003 was in relation to the obtaining of secret information.... The mobile telephone was at the same time an element to be used to facilitate the violation of professional secrets... and an advantage used to incite him to agree to commit these indescretions," said Judge Hendrickx.