Glencore International Plc (GLEN) Chief Executive Officer Ivan Glasenberg said he has to accept the retention payments Xstrata Plc (XTA) intends to pay its own employees as part of Glencore’s planned acquisition of the mining company.
Xstrata investors Standard Life Plc (SL/) and Fidelity Worldwide Investment criticized as excessive payments of as much as 172.8 million pounds ($267 million) for 73 executives. Xstrata’s CEO Mick Davis, 54, who would lead the combined company, stands to get 28.8 million pounds in bonuses over three years.
“If this is a package that keeps him there and they believe this is the package, I’ve got to accept it,” said Glasenberg, Glencore’s largest shareholder, in London yesterday. “Mick is a key guy to keep in the company going forward.”
Xstrata investors will vote July 12 on whether to approve both the payments and the 19.6 billion-pound acquisition, which would be the world’s largest mining takeover. The proposed compensation can be passed with 50 percent of votes cast and the Glencore transaction with 75 percent. Zug, Switzerland-based Xstrata needs both items passed for the deal to proceed.
Glencore won’t be allowed to vote its holding in Xstrata of about 34 percent on the deal, according to the U.K.’s takeover code, meaning Xstrata investors holding a combined 31.75 percent stake could join forces to block the takeover.
“If I was a CEO and my shareholders voted down my salary, my compensation, because they didn’t believe I was worth it, I think you’ve got to resign,” Glasenberg said.
Glasenberg, 55, who would become deputy CEO in the merged company, said it was upto Xstrata whether the payments can be adjusted. “It has to get a 50 percent vote and I hope it gets it,” he said at a dinner organized by the Melbourne Mining Club, a non-profit group that promotes the mining industry. Xstrata shareholders have been “telling everyone they are not happy,” Glasenberg told reporters after the dinner.
Glencore has also faced calls from Xstrata investors including Schroders Plc (SDR), Fidelity and Standard Life to increase its bid for Xstrata, the world’s largest exporter of coal burned by power stations. Baar, Switzerland-based Glencore is offering 2.8 of its shares for each Xstrata share. Glasenberg said yesterday that the ratio is “good.”
Glencore, the largest publicly traded commodities supplier, sold $10 billion in stock at 530 pence each in an initial public offering in May last year, ending more than three decades of operating as a closely held partnership. Glasenberg has a 15.8 percent stake, valued at about $6 billion at current prices.
Glencore declined 0.9 percent to 357.8 pence in London and Xstrata fell 0.8 percent to 959.1 pence.
A combined Glencore and Xstrata would have operations and projects in 33 countries, including 101 mines and more than 50 metallurgical facilities. It would have about 130,000 workers.
Glencore is working with Citigroup Inc. and Morgan Stanley as financial advisers, while Xstrata has tapped Goldman Sachs Group Inc., JPMorgan Chase & Co., Deutsche Bank AG and Nomura Bank International Plc. Glencore is paying as much as $80 million in fees, while Xstrata’s bill will be as much as $116 million, a document on the merger published by the two shows.
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