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.
Write to Alex MacDonald at alex.macdonald@dowjones.com
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