DJ Xstrata Chairman Backs Board's Performance in Delivering Value
Nov 20, 2012 (Dow Jones Commodities News via Comtex) --By Alex MacDonald
NEW YORK--The chairman of Xstrata PLC's (XTA.LN) Tuesday defended his board's performance after a major shareholder called into question the ability of Xstrata's board members to champion shareholders' interests if the merger with Glencore International PLC (GLEN.LN) goes ahead.
David Trenchard, vice chairman of activist fund Knight Vinke which has been an Xstrata shareholder for over two years, said the fund voted against all resolutions relating to the 70 billion merger proposal with Glencore International. "We, as a major shareholder in Xstrata, have no confidence in the independence and robustness of the…board," Mr. Trenchard said, adding he was worried about the board's ability to represent Xstrata shareholders' interests in the combined entity.
Glencore and Xstrata are seeking shareholder and regulatory approval to create the world's fourth-largest diversified miner with a market capitalization of nearly 70 billion. The deal has faced many twists since it was announced in February, including shareholder opposition to a contentious package of retention payments for some 70 Xstrata managers and a desire for a higher premium that was secured only after Qatar Holding LLC, Xstrata's second-largest shareholder, threatened to vote against the deal.
Sir John Bond, Xstrata's chairman, said at a meeting Tuesday to approve the deal that Xstrata's board has remained essentially the same. He also said that in the interim, the company has grown from a miner with a 500 million market capitalization to a company with a roughly 44 billion market capitalization.
"I think it's fair to say that the board has exercised good stewardship for the company." He noted that the company has rebuffed various offers in the past but accepted Glencore's because it provided value. Other proposals didn't proceed partly because Glencore, with its roughly 34.6% stake in Xstrata, made it clear they didn't want to sell their stake.
Mr. Bond said the merger with Glencore should be 20% earnings accretive in 2013 given that Xstrata will market all of its commodities through Glencore's trading arm rather than just a third of its products as it does at the moment. "It makes Xstrata a more valuable company in front of the board for those reasons," he said.
Mr. Bond said the company listened to shareholders' concerns over the lack of performance targets in retention packages and the packages were linked to a vote on the merger. Xstrata revised its 140-million-pound (220 million) in retention packages to be share-based and include performance targets for some individuals.
Xstrata also chose to decouple the vote by devising a new deal-voting structure.
"If listening to shareholders is a sin, we're guilty of it," he said.
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