Miner Xstrata gave its long-awaited blessing to trader Glencore's revised $33 billion offer on Monday, though only on condition shareholders also support a controversial pay package aimed at retaining key managers for at least two years.
Xstrata's non-executive directors have been considering the improved, final, offer from Glencore, the miner's largest shareholder, since September 10 - wrestling for three weeks to reconcile opposing demands from shareholders over the deal terms, the board and a more than 140 million pound ($226 million) retention package.
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Glencore was forced to raise its offer last month to 3.05 new shares for every Xstrata share held, from 2.8, after opposition from rival Xstrata investor Qatar threatened to sink the long-held plan to create a mining and trading powerhouse.
Glencore's conditions, however, included placing its own chief executive and top shareholder, Ivan Glasenberg, at the helm of the combined group - at the expense of Xstrata veteran Mick Davis, who had been due to take the job but will now leave.
On Monday, Xstrata confirmed it had bowed to rebel shareholders' demands on pay, as widely expected, and effectively split a vote on the package to retain key managers from the main vote on the merger - both had been linked in the original proposal.
But the board, which would have found it difficult not to support a higher offer from Glencore, stuck to its guns on retention and reiterated its concern that without Xstrata's management in place to guide its pipeline of projects, "the value proposition of the combined entity is at risk".
It recommended, it said, that shareholders back both the deal and the pay package.
"This view was reaffirmed by major shareholders, in particular in the light of the change of CEO and remains the rationale for retention arrangements," Xstrata Chairman John Bond said.
"Nonetheless, some other shareholders remain opposed either to the principle of retention payments or to the originally proposed inter-conditional nature of the Merger resolutions."
Xstrata added its current chief executive, Mick Davis, would be replaced on the board after his departure by an Xstrata executive, retaining the current balance of the board.
"The new vote structure is unique to say the least and we'll see if perhaps from a corporate governance point of view this ruffles a few feathers," Macquarie analyst Jeff Largey said.
"I think overall the new merger ratio and this new structure's probably enough to get it done." ($1 = 0.6193 British pounds)
(Reporting by Clara Ferreira-Marques; Additional reporting by Sarah Young; Editing by Sinead Cruise)