Commodities trader Glencore International and takeover target Xstrata said Wednesday they have agreed on revised terms for paying retention bonuses for Xstrata executives, an issue which had stirred some shareholder opposition to the deal.
But the merger continues to face difficulties on other fronts, with Qatar Holding, which owns 10 percent of Xstrata, seeking a higher bid price.
Xstrata announced that retention bonuses would start being paid only if cost synergies exceed the previous estimate of $50 million a year. Glencore said it accepted the amended terms.
When the deal was announced in February, two big fund managers — Standard Life Investments and Schroder Investment Management — also said Glencore's offer undervalued Xstrata.
Wednesday's revision of the terms for Xstrata executives comes barely two weeks ahead of shareholders' votes on the deal.
Glencore shares were down 1.8 percent at 297.4 pence following the announcement, while Xstrata's share price was up 0.9 percent at 793 pence.
Some shareholders had objected to the retention provisions in the deal, which would have handed out a total of 173 million pounds to 73 senior employees as an incentive to stay in their jobs. In particular, concerns have been raised over a three-year, $45 million deal for Xstrata's chief executive Mick Davis, who is in line to become chief executive of the merged company.
The Association of British Insurers, representing a range of investors, had spoken against the original retention provisions.
Under the revised terms, the retention bonuses will start being paid if cost synergies are over $50 million a year. The bonuses will be fully paid if an additional $300 million is achieved over the first two years.
Xstrata's chairman, Sir John Bond, said the revised terms were "a stretching performance measure which, if achieved, will exceed the cost of the retention awards and improve the ongoing cost competitiveness and value of the combined group."
Glencore, which has scheduled a general meeting of shareholders for July 11, already holds a 34 percent stake in the mining company. Xstrata shareholders are to vote on July 12.
But the deal's completion faces a new challenge in Xstrata shareholder Qatari Holding, which wants 3.25 new Glencore shares for each Xstrata share, significantly more than the 2.8 shares currently on offer.
Qatar Holding said the higher price "would provide a more appropriate distribution of benefits of the merger whilst properly recognizing the intrinsic stand-alone value of Xstrata."
Qatar Holding, like most Gulf sovereign investors, is not known for shareholder activism. But its decision to rapidly amass a stake in Xstrata in the past months suggested it wanted a bigger voice in the combined company, if not the merger process itself.
Many of its most prominent investments are in Europe. They include London's Harrods department store and stakes in Barclays PLC, Credit Suisse Group, Volkswagen AG, London Stock Exchange Group and French luxury conglomerate LVMH Moet Hennessy Louis Vuitton.
Qatar Holding has increasingly shown an interest in investing in natural resource businesses. Besides the Xstrata holding, it has been building stakes in European energy companies such as French oil company Total SA, and last year invested in gold miner European Goldfields.
Adam Schreck in Dubai, United Arab Emirates, contributed to this story.