Glencore and Xstrata moot joint legal chief role as part of merger

An insider at Swiss commodities trader Glencore told The Lawyer that the duo were likely to hold an equal role at the helm of the legal team, mirroring the general structure of the merger that sees the combined company put two people in charge of most departments such as copper, zinc and coal.

In most cases, the mooted merged entity has chosen to give a Glencore figure responsibility for marketing and put an Xstrata figure in charge of assets in each department.

Glencore’s Marshall, a former partner of Cadwalader Wickersham & Taft and legacy Mallesons Stephen Jaques (now King & Wood Mallesons), is expected to take the role overseeing the combined companies’ trading function, while Levene is thought likely to take the reins on the assets side.

The source said: “That is a common feature of the merger. That’s how it’s expected to work in legal. I think in a merger like this, they both have strong reputations in the market and huge experience in their respective capabilities.”

An Xstrata spokesperson said no positions had been confirmed and that any appointments would follow the shareholder vote on the deal next month.

Glencore declined to comment, but merger documents say the companies have been working on “detailed integration planning” since early May and that it aims to complete the restructuring of the combined group, including confirming senior appointments, within roughly 100 days of the “effective date”, expected to occur in the third quarter of 2012.

Levene has been offered a retention award to entice him to stay as part of a wider scheme, revealed in documents filed last Thursday (31 May), that is aimed at encouraging senior Xstrata employees to continue at the merged company.

He is one of six Xstrata individuals, referred to in the documents as “key employees”, set to share a maximum of £16.1m per year for 2013 and 2014 as an incentive if the merger goes ahead and certain performance conditions are met, according to the filings.

The combined legal team is expected to expand with outside additions, with no post-merger legal redundancies touted. Marshall’s and Levene’s new official job titles are unclear.

The documents also reveal that Freshfields Bruckhaus Deringer and Linklaters are set to earn the lion’s share of £25m between them for advice on the high-profile tie-up.

The scheme document filed by Xstrata puts Glencore’s estimated legal fees for the tie-up at $18.6m (£12.2m) excluding VAT, with most of this understood to be heading towards advisers Linklaters.

Xstrata, meanwhile, is set to spend an estimated £13m on legal fees, of which the bulk is thought to be earned by Freshfields.

Linklaters corporate partner Charlie Jacobs is leading for Glencore on the $90bn (£59bn) deal, while Xstrata turned to a Freshfields team led by corporate partner Julian Makin (2 February 2012).

Other firms to receive a slice of the fees are Asia-Pacific outfit King & Wood Mallesons, which is advising both companies in Australia, and Werksmans, which is advising both parties in South Africa. Bennett Jones, which advised Glencore on its £3.9bn takeover of grain trading company Viterra earlier this year (21 March 2012), is acting as the Swiss commodities trader’s Canadian counsel.

The revamped City Code on Takeovers and Mergers, which came into effect last September, requires UK-listed companies to declare their advisory expenses broken down by category such as lawyers, financial advisers and public relations consultants, but they do not have to confirm how these amounts are split between firms.

It is unclear whether Freshfields or Linklaters will retain future roles advising the combined company on transactions, with the merger putting both firms’ longstanding client relationships in the spotlight (13 February 2012).

Freshfields and Linklaters declined to comment. Bennett Jones, Werksmans and King & Wood were unavailable for comment.