Xstrata deal bonuses paid despite shareholder blocking action

Xstrata awarded bonuses linked to its acquisition by Glencore to about 20 executives late last year after shareholders blocked £144m in controversial retention payments.

According to court documents cited by Bloomberg, Mick Davis, then chief executive of Xstrata, wrote to these employees to inform them of they had been awarded a "transaction bonus" on December 4 last year.

That was two weeks after Xstrata shareholders approved the miner's deal with trading house Glencore but voted against the retention bonuses for about 70 senior managers.

The so-called "golden handcuffs", which would have been paid to ensure the Xstrata staff stayed at the company after the deal closed, were a key point of contention in the marathon negotiations over the near-$70bn acquisition. Shareholders claimed that by blocking them they had scored a victory against "corporate greed". The decision led Sir John Bond, Xstrata's chairman, to announce his resignation.

The "transaction bonuses" were awarded in recognition of the employees' work on the merger, according to Mr Davis's letter.

The letter has come to light because of a lawsuit filed against Glencore by Richard Elliston, former company secretary at Xstrata. According to Bloomberg, Mr Elliston was paid a transaction bonus of £487,925 but claims he should have also been paid £419,000 as severance when he was required to resign from the company in August following the completion of the merger.

It is unclear how much Xstrata paid out in total in transaction bonuses.

"The task of achieving a merger between Xstrata and Glencore has brought with it many hurdles along the way and has been a real test of our character to rise up and meet such obstacles," Mr Davis wrote in the letter, according to Bloomberg.

"I would like to thank you for the contribution you have made to get Xstrata to this point of the merger and am pleased to inform you that you have been awarded a transaction bonus."

Almost all of Xstrata's top managers have left the company since the deal was approved, with Mr Davis recently announcing that he has launched a new mining venture called "X2" along with Trevor Reid, former Xstrata chief financial officer, and "a team of executives responsible for the creation of Xstrata plc".

Mr Elliston's lawyer did not respond to requests for comment. Glencore and Mr Davis declined to comment.

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