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Glencore-Xstrata merger approved but retention plan

rejected
ALEX MACDONALD DOW JONES NOVEMBER 21, 2012 12:44PM

XSTRATA'S shareholders approved a plan to create the world's fourth-largest diversified miner with a
market capitalisation of about $US70 billion ($67 billion) by merging the two Anglo-Swiss miners in an
all-share deal. However, more than 78 per cent of Xstrata's voting shareholders voted against proposed
retention packages totally some 140 million pounds ($214 million).
As a result the deal will now go ahead without the packages that Xstrata's board had said were essential for
retaining some 70 of its managers who will be responsible for more than 80 per cent of the combined
company's earnings.
Following the vote, Xstratas non-executive chairman Sir John Bond said he would step down once the merger
has been completed, marking the first major resignation following the overwhelming rejection of the board's
recommended retention packages.
"In the light of the shareholders' decision not to support the board's recommendation, I have informed the
Xstrata plc board and Glencore's current chairman that, once the merger has completed, I intend to...step
down." Mr Bond said. He added he would instruct the new board to start a search process for a new
independent non-executive chairman and would leave once the search was satisfactorily completed.
Mr Bond, 70 years old, has been Xstrata's chairman since May 2011 and played a key role in the merger
process. However, he faced mounting dissatisfaction from some shareholders after Xstrata's second-largest
shareholder, sovereign wealth fund Qatar Holding, secured a 3.05 share swap ratio offer from Glencore after it
threatened to vote against the original Xstrata-backed 2.8 share swap ratio, a move that would have scuppered
the merger.
Mr Bond also faced criticism for agreeing to the excessive retention payments and for backing a voting
structure that made approval of the merger contingent upon acceptance of the retention packages.
After canvassing shareholders on two separate occasions, Xstrata's board tweaked the packages to make them
share based and to include performance targets for some top executives. The board later proposed to decouple
the retention packages from the merger vote but neither move proved sufficient to gain the necessary
shareholder support.
Xstrata's chief executive, Mick Davis--who will become CEO of the combined Glencore Xstrata PLC for only
six months before handing over to Glencore CEO Ivan Glasenberg--said he regretted the shareholders' rejection
of the retention packages since it "introduces unnecessary risks to the merged company's future value

proposition" but he said "shareholders...have spoken clearly and we respect their views."
The spread of Glencore shares to Xstrata shares closed at 2.97, the closest they have been to the revised offer
since the deal was announced in February.
The deal now needs final anti-trust regulatory approval from the European Union, China and South Africa,
Xstrata said.
Additional reporting: Ed Ballard

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