* Xstrata shareholders back deal, reject retention package
* Glencore shareholders back deal, 99.4 percent in favour
* Xstrata, combined group chairman Bond resigns
By Clara Ferreira-Marques and Emma Farge
LONDON/ZUG, Switzerland, Nov 20 Shareholders in
Xstrata prompted the resignation of the miner's chairman
on Tuesday as they voted through a $31 billion takeover by
trader Glencore but twice snubbed a controversial pay
plan to retain key managers.
Xstrata Chairman John Bond, formerly chairman of HSBC
and Vodafone, would have been chairman of the
new Glencore Xstrata.
Bond had been under fire for months over a 140 million pound
($223 million) "golden handcuffs" package for managers the
Xstrata board said were key to operations, and over what some
investors felt was an insufficient fight for better terms from
Glencore, Xstrata's top shareholder.
It took an unprecedented, activist stance from the Gulf
state of Qatar, an unexpected kingmaker and second-largest
shareholder in Xstrata, to force Glencore to improve the offer -
just hours before a September shareholder vote, later cancelled.
At the shareholder meeting in the lakeside Swiss town of Zug
activist investor Knight Vinke, also a top 25 Xstrata
shareholder, accused the board of "governance failings" and said
it had no confidence in its independence and robustness.
Bond defended both the board and the retention plan.
"Right now, there is $20 billion of your money invested in
20 projects and extensions," he told investors gathered for the
votes. "It is the Xstrata management team that is responsible
for making sure these investments are made safely, soundly and
But hours later he resigned, citing shareholder votes that
had opposed every one of the Xstrata board's recommendations.
"He's fallen on his sword," analyst Paul Gait at brokerage
Bernstein said. "The Qataris basically took the running of the
merger process out of his hands - and then there was essentially
a vote of non-confidence passed by the shareholders in the
company regarding his recommendations.
"How his position could ever have been tenable after that is
VOTE IN FAVOUR
Following an overwhelming vote in favour from Glencore's
shareholders, almost 79 percent of Xstrata's voting shareholders
gave their support to the takeover - but without the pay deal.
Qatar had said it would back the main resolutions on
Glencore but would abstain on the retention, making it likely
that vote would fail.
In the event, 78.4 percent of those voting cast their votes
against pay awards described by Knight Vinke as "egregious".
Glencore was not able to vote its shares on Tuesday.
At least one Xstrata shareholder, top 10 investor Scottish
Widows Investment Partnership, said the miner would still have
to manage "retention risk" as it executes on a pipeline of
projects, cautioning an unapproved arrangement could "offer less
transparency and accountability to shareholders".
Tuesday's complex series of votes, taking over more than two
hours, brought one of the sector's biggest ever deals closer to
the finish line, with only antitrust clearance remaining.
Xstrata board members, visibly relieved, exchanged handshakes
and pats on the back as the voting ended.
A verdict from the European Union, the toughest of the
remaining hurdles, is due later this week. Glencore has already
offered concessions in its zinc operations to avoid a lengthier
Approval from Brussels will all but secure a deal, ending
years of on-off merger talks between Xstrata and its largest
shareholder and more than nine months of often tense
negotiations to create what both sides hope will be a mining and
The tie-up, on the cards after Glencore listed last year,
looks set to become the largest deal in the sector since Rio
Tinto's acquisition of Alcan in 2007.
Shares in the two sides were trading on Tuesday at prices
implying a ratio of 2.97, moving towards Glencore's offer of
3.05 new shares for every Xstrata share held.
"It's like a marriage. People are afraid when the moment
comes but it's good in the long term," asset manager Thomas
Mitsoulis, whose clients own Xstrata shares, said in Zug.
"Shareholders want more and in the long term the merger will
mean more cash and more dividends."
Analysts and industry advisers have already begun focusing
on the next steps for a group that, with its spread of assets
from mines, to oil wells to farms and more ships than Britain's
Royal Navy, is expected to be a deal machine in frugal times.
Xstrata's own growth over the last decade has been fuelled
by deals and it was set up with a $2.5 billion acquisition of
Glencore coal assets. Glencore, for its part, joined the stock
market last year with the intention of funding larger deals,
including the bid for control of Xstrata.
"These companies have looked at doing significant
acquisitions over the last year - the question is whether they
buck the trend and provide more buoyancy in the industry,"
Alexander Keepin, partner and co-head of mining at law firm
Berwin Leighton Paisner said.
Glencore and Xstrata have already proved a bright spot for
the nine banks, law firms and countless other advisers, who will
share a fee pot worth some $200 million.
Depending on the combined group's final weighting, Glencore
Xstrata could be the 13th largest company in Britain's FTSE 100
, representing more than 2 percent of the index.
It could also sell some non-core assets - not least
Xstrata's chrome and platinum, analysts say, and revise
Xstrata's portfolio of mining projects, some of which are
ambitious greenfield mines that Glencore does not prioritise.