Xstrata’s Finance Chief to Step Down after Merger with Glencore

on Dec 5, 2012
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**Xstrata’s CFO Quits on Completion of Mega Merger**

Anglo-Swiss mining company Xstrata PLC (LON:XTA) announced on Tuesday that its chief financial officer Trevor Reid, one of the handful of executives who set up the miner a decade ago, has decided not to take up the same position at Glencore-Xstrata PLC upon completion of the merger, The Financial Times reported on 4 December 2012.
The paper quoted Reid as saying: “The next phase of Xstrata’s evolution is now well under way and, following shareholder approval for the merger with Glencore, I have decided to step down on completion of the transaction.”

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Reid will stay on his position until the deal clears the remaining regulatory hurdles, which is expected in the first few months of next year. He has agreed to act as consultant to the combined group for a period of up to six months following completion of the merger in order to support the integration of Xstrata’s and Glencore’s (LON:GLEN) finance functions. It is also understood that Glencore’s chief financial officer, Steven Kalmin, will take up the position after Reid’s official departure. Yet Xstrata and Glencore declined to comment on a likely replacement for the miner’s finance head.

Following the announcement of Reid’s decision to quit the merged company, shares in Xstrata fell 0.6 per cent to 1,025.5 pence, while Glencore stock declined by 0.4 per cent to end the day at 341.3 pence, both companies lagging a slightly firmer UK benchmark FTSE-100 index.
**Reid’s Departure Raises Exodus Concerns**
!m[Trevor Reid Decides Against Glenstrata Role After Investors Failed to Approve Controversial Retention Plan](/uploads/story/965/thumbs/pic1_inline.png)Reid’s position has been in doubt since Xstrata’s long-serving chief executive Mick Davis was replaced at the helm of Glencore-Xstrata by the commodity trader’s current CEO, Ivan Glasenberg. After Glasenberg became the nominated chief executive of the combined group following a deal in September which improved the terms of the takeover, Davis announced he would leave after the merger was completed.

Given that Reid has been Davis’ right hand since Xstrata’s inception in 2001, the departure of Xstrata’s CFO is unlikely to surprise many in the industry. Yet the move has raised fresh concerns over an exodus of the miner’s core team following its merger with Glencore.
“Investors Basically Got What They Wished For”
The £56 billion deal between Xstrata and Glencore, which will create one of the world’s largest natural resources companies, was narrowly approved by shareholders last month but a controversial £140 million package of retention bonuses for senior Xstrata staff was voted down despite Xstrata’s board recommendation for approval of the merger only if the retention package was in place. Under the proposed controversial retention plan, Reid had been due to receive about £11 million in shares over two years. As the bonuses were blocked by investors, he will now receive a termination payment of £5.45 million as part of his employment contract which provides for a payment of one-year’s salary, bonus and other benefits if he ends his contract following a change of control at the company.

Jeff Largey, mining analyst at Macquarie, told The Financial Times that “investors basically got what they wished for” when they voted against the retention bonuses. “If they were not going to incentivise these guys to stay, they had to expect that some would leave,” he said, adding that the concerns about an exodus were probably overblown. “There is nothing to prevent Glencore from offering incentive packages for key people they want to stay,” the analyst remarked.

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