Xstrata's Davis lured with $45M carrot

WHILE the share swap ratio for the $A84 billion merger of equals between Xstrata and commodities trader Glencore International remain unchanged, £173 million ($A274 million) will be paid in retention fees to key members of Xstrata management.
Xstrata's Davis lured with $45M carrot Xstrata's Davis lured with $45M carrot Xstrata's Davis lured with $45M carrot Xstrata's Davis lured with $45M carrot Xstrata's Davis lured with $45M carrot

Xstrata chief executive Mick Davis will be paid $A45.5 million to stay on in the chief's chair, while Glencore's Ivan Glasenberg will be his deputy.

From next year he would receive more than £19 million in retention pay, plus salary, bonus and benefits - as well as a deferred award of shares worth as much as £6 million, as part of a performance scheme, subject to meeting targets over three years.

Some 73 senior Xstrata managers have been offered retention payments.

The details were revealed in the merger document, in which Glencore will exchange 2.8 new Glencore shares for every Xstrata share to create a mining goliath with a market capitalisation of around $US64 billion, using today's prices.

In documents sent to investors on Thursday detailing the terms of the long-awaited $30 billion takeover bid by trader Glencore (GLEN.L), Xstrata said it would pay retention deals to 73 of its key employees totalling more than 170 million pounds.

All managers and senior executives, other than Davis, will be offered two-year packages to stay on after the all-share merger is completed, as Xstrata seeks to hold on to the operating expertise that built the miner up over a decade.

Xstrata shareholders will vote on the Glencore bid and retention award package on July 12 after initially agreeing to the merger in February.

Glencore already owns around 34% of Xstrata and on conclusion of the bid, Xstrata shareholders will own 45% of the merged group.

Both companies will be paying as much as $A200 million in fees to advisers, of which the banks alone will receive up to $130 million.

Glencore is being advised by Citigroup, Morgan Stanley, Credit Suisse and BNP Paribas, while Xstrata is being advised by Deutsche Bank, JP Morgan, Goldman Sachs and Nomura, with a role also for Barclays Capital.

The next step for the pair is to file merger documents with the European Union, but the deal is expected to be finalised by September.

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