Mick Davis, miner Xstrata’s chief executive, will receive over £4.6m for half a year’s work he will not perform, after trading behemoth Glencore said he will not stay on after the merger of the two FTSE 100 (FTSE: ^FTSE - news) giants as originally planned.
Mr Davis had been set to lead the combined group for six months, before handing over to his counterpart Ivan Glasenberg - who will now hold the top job from the start.
His £4.6m-plus payment - representing his pay, bonus, benefits and pension allowance for the six-month period he was to work - will come on top of the £9.6m he was already set to receive for the termination of his contract. He may also cash in company shares.
Mr Davis will briefly stay on as a consultant with the combined group “to assist with an orderly handover”, Glencore said. For this, he will not get a monthly payment but will be entitled to up to 30 hours of private use of an Xstrata (Other OTC: XSRAF - news) jet.
The announcement of the change planned post the £46bn tie-up of the two companies emerged as Chinese regulators gave the greenlight to their merger, representing the final hurdle to the completion of a deal which has been more than a year in the making.
Mr Davis’s earlier than expected departure is understood to have been initiated by Glencore, on the basis that the process had dragged on so long that it was time for Mr Glasenberg to lead the group.
Analysts noted that 'Big Mick’ Davis, a South African mining veteran, had already gone “off message” by recently commenting that Glencore’s trading culture lends itself to a “very centralised” approach that is foreign to Xstrata.
As well as Mr Davis’ earlier than expected departure, various high-ranking Xstrata executives will also depart, it was announced.
Xstrata’s copper head Charlie Sartain, nickel head Ian Pearce, and Loutjie Smit, the interim alloys head, are all leaving. It was already known that Xstrata’s chief financial officer Trevor Reid would not stay on post merger, and strategist Thras Moraitis was expected to depart , as was confirmed on Tuesday.
Glencore said it will unveil its new power structure when the merger closes early next month. Its position is understood to be that it is keeping the operational staff it wanted to retain.
However, other sources said some executives leaving had been approached by Glencore over staying on at the combined company, but left anyway. A number will stay on for six months to help with the handover.
The completion of the merger, the biggest deal ever seen in mining, had most recently been held up by Chinese competition concerns about the combined company’s dominance in the commodities world, relating to the copper market in particular.
As a concession to Beijing, Glencore said on Tuesday it will sell its interest in Las Bambas, a copper project being developed by Xstrata in Peru. It also agreed to conditions around offering long-term supply contracts to Chinese customers for the next eight years.
Glencore said that after a court hearing to sanction the plans - seen as a formality - the two companies should merge on May 2, with the combined group’s shares starting to trade in London on May 3.
The market reacted well to the final confirmation of the deal, with Glencore closing up 1.2pc at 325.1p, and Xstrata up 2pc at 986p.
Mr Davis has not revealed his intentions, but wants to lease Xstrata’s existing London offices, the company said. It is rumoured that he is working on a mining fund backed with Middle Eastern money.