PARIS--Xstrata PLC's (XTA.LN) second-largest shareholder,
sovereign wealth fund Qatar Holding LLC, said Thursday it will vote
in favor next week of the Anglo-Swiss miner's merger with Glencore
International PLC (GLEN.LN), regardless of whether a controversial
retention pay package is approved.
Qatar's statement removes a potential stumbling block for the
$68 billion all-share deal that would create the world's
fourth-largest diversified mining company.
The merger has also gained support from other major shareholders
including Standard Life Investments and Scottish Widows
Partnership, but the complexity of the voting structure to approve
the merger means scenarios still exist in which the deal gets voted
down, even if a majority of shareholders favor it.
In early morning trading, the spread between Glencore shares and
Xstrata shares rose to its highest level since the deal was
announced in February, an indication that investors feel the deal
now has a better of chance of closing.
Xstrata shareholders will cast three votes on Tuesday, following
the company's decision to decouple the merger vote from approval of
retention packages in a concession to opponents of the
controversial payments.
The pay package, worth roughly (GBP)140 million ($221.8
million), is designed to retain the services of some 70 Xstrata
managers after the merger. The managers would be responsible for
managing mining assets that would contribute to more than 80% of
the combined company's earnings.
In the first two votes, Xstrata shareholders will be asked to
vote on two resolutions: one approving the deal with the retention
packages, the second approving the deal without the retention
packages.
A third vote will then decide whether to approve the retention
package. The outcome of that vote will determine which of the first
two resolutions should be discarded, thereby leaving shareholders
with one final outcome.
Glencore, Xstrata's largest shareholder with a 34% stake, isn't
allowed to vote on the deal.
Qatar Holding said it would vote in favor of the first two
resolutions. "Qatar Holding continues to see merit in a combination
of the two companies and is satisfied with the terms of the
proposed merger," the sovereign wealth fund said in a
statement.
However, "Qatar Holding is conscious of the sensitivities
concerning governance issues in the U.K. and does not feel it
appropriate to influence the outcome either way," it added. For
this reason, it said it would abstain from voting on the third
resolution to approve the retention package.
Qatar Holding initially opposed the Glencore-Xstrata merger, but
changed its position after Glencore improved the terms of the deal
for Xstrata shareholders in September.
Continuing nervousness about the approval of the merger centers
on a scenario in which the first resolution passes, but the second
and the third are rejected, effectively killing the deal.
Write to Alex MacDonald at alex.macdonald@dowjones.com
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