Our ECGS analysis of the two extraordinary meetings of shareholders convened successively by Xstrata expressed strong reservations about the proposed conditions of the merger with the non-least Anglo-Swiss trading house Glencore.
The important suggested synergies failed to hide that the bulk of the expected profitability was coming from Xstrata and that the exceptional financial conditions offered to the executives, including the CEO Mick Davis, betrayed some likely deception.
A first extraordinary meeting was adjourned in July to add more serious performance conditions on the pay package while reviewing the synergies announced. Facing a risk to miss the deal, Glencore, the giant commodities trading, postponed once again on September 7th. the merger approval meeting and raised its offer for Xstrata, which now reaches $ 37 billion (€ 29.15 billion). Glencore also finally increased the proposed exchange ratio to 3.05 shares. All in 10% more for the Xstrata shareholders.
This teaches us at least two things:
Against the forces of a transaction biased by financial markets with little concern for shareholders, employees or consumers interests. The voice of investors at general meeting with the help of independent analysts like those of ECGS can pay big dividends to these clients: we have seen in recent years in cases as diverse as Portugal Telecom or Capital Shopping Centers.
Moreover, the excessive executive compensation of mercenaries generally set in the name of the alignment of interests leads often to a betrayal of the interests of shareholders. The attitude of CEOs vis a vis their own remuneration is extremely revealing of the true motives of their actions. Cave Canem, wolverines rarely respect their shareholders.
September 10 th 2012
