THE £56bn soap opera between commodity giants Xstrata and Glencore finally came to a head yesterday as Xstrata investors approved the mining mega-merger.
In a meeting lasting just over two hours, investors green-lit the merger – whose twists and turns have entertained the market since Glencore first approached Xstrata in February – and paved the way for the creation of what both sides hope will be a trading and mining powerhouse.
At shareholder meetings held yesterday in Zug, Switzerland, almost 79 per cent of Xstrata investors voted the merger through, although they vetoed the controversial pay packages for top executives.
The deal – at a sweetened merger ratio of 3.05 new shares for every Xstrata shares – is a victory for active shareholders, including Qatar Holding. The sovereign wealth fund, Xstrata’s largest shareholder after Glencore, said last week it would back the deal but abstain from voting on the remuneration, essentially scuppering the pay plans.
The resolution to back pay packages for around 70 executives – that Xstrata insisted was key to retain key managers – failed by about eight per cent, and led to chairman Sir John Bond standing down from his position.
Mick Davis, chief executive of Xstrata, said he was disappointed with the decision not to approve the retention agreements “deemed crucial to the success of the combined group”.
“In my view, this introduces unnecessary risks to the merged company’s future value proposition,” Davis added.
Alexander Keepin, co-head of mining partner at law firm Berwin Leighton Paisner, said Bond’s departure was not “without precedent”.
“The earlier shareholder spring saw remuneration reports voted down and executives stepping down,” he said, adding that Mick Davis’ position as interim chief executive is “not impacted at all” by the vetoing of the pay packages. Davis will stay at the helm of the merged firm for six months before handing over to Glencore boss Ivan Glasenberg.
The enlarged company will be called Glencore Xstrata, and headquartered in Zug. The tie-up, which is thought to be one of the largest deals in the mining sector, still needs approval from EU antitrust regulators and the Chinese authorities.
GLENSTRATA IN NUMBERS
THE CRUCIAL VOTES
■For the merger with the retention package: 67.85 per cent
■ For the deal without the retention package: 78.88 per cent
■ Against the retention package: 78.43 per cent
A HUGE NEW FTSE 100 PLAYER
Rank Name Mkt cap (£m)*
1. Royal Dutch Shell (A+B) 130,372.6
2. HSBC Holdings 108,207.2
3. BP 79,247.2
4. Vodafone Group 77,780.9
5. GlaxoSmithKline 65,932.8
6. Brit American Tobacco 61,143.4
7. Diageo 44,934.6
8. SABMiller 41,708.5
9. Rio Tinto 41,404.9
10. BHP Billiton 39,559.1
11. AstraZeneca 35,241.4
12. BG Group 33,985.5
13. GLENCORE-XSTRATA? TBC
14. Standard Chartered 33,841.2
15. Lloyds Banking Group 30,936.8
A GLOBAL COMMODITIES GIANT
Glencore-Xstrata will be the 4th biggest commodities company in the world by market capitalisation, after BHP Billiton, Vale and Rio Tinto.
The mega-merger pulled in some of the City’s biggest names, with JP Morgan Chase, Goldman Sachs, Nomura Holdings and Deutsche Bank advising Xstrata on the deal, while Morgan Stanley and Citigroup advised Glencore, and Lazard advised shareholder Qatar Holding.