Xstrata PLC chief executive officer Mick Davis has been offered a three-year retention package worth almost £30-million pounds ($46-million U.S.) to stay on at the helm once the miner joins forces with trader Glencore International PLC in one of the sector’s largest ever deals.
In a document sent out to shareholders and detailing the terms of the $30-billion all-share takeover bid by Glencore , Xstrata said retention deals for 73 of its key employees would total more than £170-million.
All managers and senior executives other than Mr. Davis will be offered two-year packages to stay on.
The payments, particularly the sum offered to Mr. Davis, who is one of the best-paid chief executives in the FTSE 100, could irk some of Xstrata’s more reticent shareholders, after more than a third of voting shareholders rejected pay plans at Xstrata’s annual shareholder meeting earlier this month.
But Xstrata told its shareholders the retention payments were “key” to the success of the merger.
“These arrangements depend upon retaining the core senior management of Xstrata, given that more than 80 per cent of the combined group’s income will be derived from its operating assets, and are the reason why the retentions were provided for as part of the transaction.”
Shareholders cannot approve the deal without approving the pay packages, it said.
Documents sent out to investors on Thursday, which also include Glencore’s prospectus for the issue of new shares, confirmed Glencore’s offer of 2.8 new shares for every Xstrata share held, to conclude its long-standing plan to create an integrated mining and trading powerhouse.
At current prices, given Glencore is already Xstrata’s single largest shareholder with an almost 34 per cent stake, that all-share offer values the takeover bid at $30-billion.
Glencore and Xstrata have long been expected to tie the knot, but the two sides will be paying as much as $200-million in fees to advisers, from banks to public relations consultants and lawyers. Banks will receive up to $130-million.
Glencore is being advised by Citigroup, Morgan Stanley, Credit Suisse and BNP Paribas. Xstrata is being advised by Deutsche Bank, JP Morgan, Goldman Sachs and Nomura, with a role also for Barclays Capital.
Both sides were advised by an independent consultant, former Citi banker Michael Klein, who shuttled between executives to broker the deal.