LONDON One of Britain's leading shareholder advisory groups on Wednesday urged Xstrata XTA.L investors to reject a $33 billion takeover plan by commodities trader Glencore (GLEN.L).
Advisory body Pirc said it was concerned over the level of due diligence carried out on Glencore given the complexity of its business and insufficient independent board representation at Xstrata.
Under a complex structure, Xstrata investors will be able to vote on the merger at the miner's extraordinary general meeting on November 20 as well as on a lavish multi-million pound plan to retain managers.
Even a rejection of the retention package would not endanger the merger.
Pirc said in a statement that excluding the chairman, only three Xstrata board directors are considered to be independent according to Pirc's own guidelines.
"This raises concerns about the objectivity with which the decision behind the deal was taken by the Xstrata-claimed independent directors," it added.
Pirc said there were also concerns over a possible executive influence on the decision "due to the rather lucrative package involved should the deal be approved and realised".
In September, the commodities trader bowed to investor pressure and raised its bid to 3.05 new shares for every Xstrata share from an earlier ratio of 2.8.
ISS, the shareholder advisory firm closely followed by U.S. institutional investors, initially advised shareholders to vote against the tie-up.
It has since recommended that investors support the merger and reject the remuneration proposals, following the adjustment of the share ratio in favour of Xstrata shareholders.
The Association of British Insurers last week issued an 'amber-top' notice to its investors, which also recommended a vote in support of the merger and a rejection of the pay terms.
(Reporting By Raji Menon; Editing by Mike Nesbit)