First announced almost a year ago, the merger was almost derailed by Qatar's sovereign wealth fund, was held back by a public battle over retention bonuses for Xstrata's executives, and then completely restructured in the fall.
Xstrata CEO Mick Davis was originally slated to become the head of the combined company, only to see the terms of the deal changed to put Glencore chief Ivan Glasenberg on top. Now he'll oversee the transition for 6 months, then step down.
The deadline for the deal has been extended again, but for final approvals. As the tenor of the deal has changed, so have Davis' feelings about it. In an interview, Davis told the FT, "This is a takeover and no longer a merger — that’s the reality of it"
He worries that the company that he built won't be managed the right way in its new incarnation, and that he won't be able to build an effective bridge between the companies in only six months. There's a fundamental difference in culture, he says:
“Glencore has a completely different view of the way a company should be run ... [Trading] is about managing risk, making sure your traders don’t create more risk than you’re comfortable with. It lends itself to a very centralized approach, where decision rights are elevated to the highest possible level ... Running a distributed, asset-rich company like ours means the people who actually take the decisions must be where the action is and they must have as much unfettered discretion to get things wrong — otherwise how would they learn?”
And because his company's board voted against bonuses designed to keep Xstrata executives on board, the top talent that has very specialized
The push by Glencore to get the deal done at any cost may end up backfiring badly.
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