As Xstrata shareholders learned that Glencore has refused to budge on its offer of 2.8 new shares for each Xstrata share, the circular showed that a group of around 70 managers and senior employees will be handed a slice of the huge payout as a reward for their loyalty.
Mick Davis, who will be chief executive of the enlarged group, stands to make almost £30m on top of his salary and long-term bonuses if he stays with the firm for the next three years.
Investors including Standard Life and Schroders have already voiced concerns that top staff are being rewarded handsomely while investors stand to win a premium of just 11 per cent for their stock.
But the mining giant warned shareholders against a protest vote against the payouts, pointing out that the deal will collapse if a separate “management incentive arrangements resolution” fails.
Glencore shareholders will vote on the merger on 11 July, followed by Xstrata’s investors the following day. The firms expect the merger to close in the third quarter of the year.
But the firms need 75 per cent approval to pass the tie-in, leaving power to block the deal in the hands of a relatively small group of disgruntled institutions.
The firms’ advisers will make up to $200m if the deal goes ahead. Glencore’s bankers, including Citigroup, Credit Suisse and Morgan Stanley, will share a pot of up to $50m for financial and corporate broking advices. Xstrata’s team of Deutsche Bank, JP Morgan, Goldman Sachs and Nomura will split as much as $80m.
Xstrata’s PR team will scoop up to £2.8m for the duration of the merger, while lawyers for the two firms are set for a £25m payday.
The firm expects to make earnings before tax, interest, depreciation and amortisation of $500m for first full post-merger year. Xstrata’s independent directors said yesterday the biggest firm is “best positioned to succeed in a changing industry landscape”.