Xstrata concedes over pay in bid to save £57bn merger

Xstrata has bowed to pressure from angry shareholders over its proposed mining-commodities mega-merger with Glencore, significantly changing 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 another carrot to shareholders, who have become extremely frustrated about 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. 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".

Glencore chief executive Ivan Glasenberg is sitting on a loss after buying stock at around 350p earlier this month; it has now fallen below 300p.