Potential evaporation

"We are confident that BP will not receive any serious offers for its stake in TNK-BP; we are the only serious buyers," Polovets said, noting that BP had not asked AAR for permission to provide confidential data on TNK-BP to a prospective buyer in the six weeks since BP announced that it received an indication of interest from potential buyers. At the same time, AAR has reiterated its readiness to buy half of BP's stake in TNK-BP, should BP be determined to divest.

Miner Xstrata will be tying its future to trader Glencore at a turning point as it moves from an acquisition-fuelled first decade to a period of organic growth, intended to boost volumes by 50 percent and cut costs. Were many Xstrata staff to leave and take their revenue streams with them, that could cost investors more than they gain from curbing pay. Unlike in other mergers, there is little overlap in revenue-generating staff between Glencore and Xstrata.

Although AAR has not yet sought financing for its potential buyout of BP's 25 percent stake in TNK-BP, Polovets said the group had received unsolicited offers for financing of a possible deal from several major banks. "We are holding off on the financing conversation. (Additional reporting by Melissa Akin and Andrew Callus; Editing by Erica Billingham) We want to get a deal with BP first," Polovets said.

That means at the end of the day, Glencore and Xstrata executives are likely to get both their merger and their pay, while silencing critics who had initially accused them of ramming the deal through without a separate pay vote. But as unpopular as the retention packages are, fund managers may prove too worried about threatening the commercial promise of the union - and going against the advice of Xstrata's board - to risk making a stand.

That means that when the vote on the pay deal finally takes place, shareholders will know whether their decision would scupper the merger or not. The voting shake-up plays on a division of responsibility at fund houses, whereby separate teams shape views on the logic of the merger and on resolutions linked to governance issues like incentives and bonuses.

That could be advice for corporate governance advocates who sought a separate vote on the lavish executive pay deal that was bundled in as part of the terms of the $33 billion merger between Glencore and Xstrata. Careful what you wish for.

Even after heated battles on pay at a number of companies this year, in a series of votes that became known among corporate governance advocates as the "shareholder spring", fund managers proved reluctant to actually vote down pay deals which could spur talented executives to take their skills elsewhere. Xstrata shareholders who have opposed the deal from the outset have had to weigh the merits of speaking out against the union and the risk of inflicting damage to the share price.

Thanks to a voting structure shake-up, shareholders will now be able to vote for the deal without the pay, and have an option to reject the proposed retention packages, achieving what looks like a victory against excessive boardroom remuneration.

Some asset managers like Threadneedle and Schroders feel Glencore - Xstrata's biggest shareholder - is forcing through a deal that fails to reward fellow investors for their long-term support of the miner or for the increased volatility on future returns that a union with Glencore would probably bring. OPPOSITION
With its opaque image and corporate governance record, Glencore's bid to merge with Xstrata has provoked opposition from institutional owners of the miner at every turn.

"There have been some corporate events where the companies have tried to put horrendous pay packages through that have been linked to the corporate action and we've had to say yes and sign it off because we want the actual corporate event to happen," said Angeli Benham, LGIM's UK Corporate Governance Manager.

"Under the bundled scenario, the corporate governance and investment teams have to work together to reconcile views. Now they can just vote separately, and the likely objections to the retention package and corporate governance will be much less consequential.

"There's nothing wrong with paying executives well if the shareholders are doing well too. But the whole obfuscation that is going on here and across the industry on pay, we are very much against," the fund manager said, asking not to be identified while discussing an investment decision on a deal that is still up in the air. One former Xstrata shareholder, who sold out of his position soon after the Glencore merger talks began, described the awkward dilemma facing shareholders as "appalling".

Among the projects set to come on stream are Koniambo, a challenging greenfield ferronickel mine in New Caledonia, and the Las Bambas copper project in Peru. Investors may conclude that now is no time to risk losing staff. The way the deal is now structured, means that you can almost divorce the two," Wong added. "Investors should make a joined up decision, to say - we may not like the retention packages but on balance, do we need them because these executives are so essential to the merged entity?Britain's top fraud busting agency is to focus on big cases and improving intelligence and quality control, as its new boss shakes up a body lambasted in the courts for its handling of a case against a pair of high-profile property barons.

"This separation of investment and corporate governance decision-making is a problem that requires addressing," said Simon Wong, a partner at Governance for Owners, a fund manager that invests on the premise that guarantees of shareholder rights improve long-term returns.

In any case where there is a reasonable prospect of conviction, and it's in the public interest to prosecute, the SFO will prosecute, whether individuals or corporates," Green said. But the SFO will take care in using DPA, or other tools like immunity from prosecution and leniency for companies that blow the whistle themselves on fraud. (Reporting by Huw Jones; Editing by Mark Potter) "Corporates cannot be seen to be allowed some special kid glove treatment.

BP can negotiate with other interested parties but cannot do a deal with them for a further 90 days. EXPRESSION OF INTEREST
Under a timeline set by the shareholder pact, AAR has until the end of this week to express its interest in buying BP's stake. AAR will submit an expression of interest on July 19, Polovets said. It would be willing to buy one-half of BP's stake in TNK-BP - or a 25 percent stake - at a current market price of around $10 billion.

Data compiled by Legal & General Investment Management showed just six remuneration reports were voted down this year. Investors in a merged firm without the pay deal may find they have less clout because votes on pay could be advisory rather than binding. If the Xstrata pay deal is rejected and the merger goes ahead without it, there is no clarity on what terms the merged company would then decide offer Xstrata staff.

Fridman quit in May as CEO and BP put its stake up for sale at the start of June.
Shareholder relations at TNK-BP, which have often been rocky since BP came in as an equal partner in 2003, broke down last year when the British group tried to reach a strategic alliance with state-controlled Russian oil major Rosneft (ROSN. AAR blocked the deal in the courts, successfully arguing that it violated an exclusivity clause in the TNK-BP shareholders' agreement. No comment was immediately available from BP. The ensuing fallout has left the company without a board quorum, blocking dividend payments.

The deal collapsed at the last minute. "Most shareholders had no concerns about AAR being a significant shareholder in BP," Polovets said, adding that AAR would not seek board representation and would accept a lockup agreement to avoid putting pressure on the stock. In an ultimately futile attempt to unblock their strategic deal, Rosneft and BP offered in May 2011 to buy out AAR's stake for $32 billion through a joint venture under effective Rosneft control.

L) for cash and stock to put an end to a bitter shareholder conflict. The billionaire co-owners of Anglo-Russian oil venture TNK-BP TNBP. MM would be willing to sell their stake to British oil major BP Plc (BP.

Such a deal would release BP from the obligations under the TNK-BP shareholders' agreement barring it from partnering with other companies in Russia, such as Rosneft and gas export monopoly Gazprom (GAZP. But AAR's preferred option would be to exchange its stake in TNK-BP for cash and a stake of 10-12 percent in BP. "It would make more sense for all parties involved," Polovets told Reuters.

"You hold them on a short lease. Preet Bharara, an attorney from the Dept. It's a robust alternative to the binary choice you have," Bharara told the conference. This threatens prosecution if a company refuses to make changes and can avoid a hefty fine that could close down a company and put many out of work. of Justice in New York, said DPA was an important option when faced with a "binary choice" of potentially destroying a company or letting it go scot-free.


"Such a deal could be structured to take effect over a period of five to seven years, during which AAR would continue to manage TNK-BP and help expand the company through relationships with Rosneft and Gazprom," he added. Polovets indicated that AAR was not proposing that a share swap take place immediately. "In the meantime, the management of BP could focus on stabilizing its operations elsewhere and grow its business outside of Russia so that the Russian barrels don't represent such a high percentage of BP's reserves and production.

We want to have liquidity and an exit strategy," Polovets said by telephone from New York. The reaction of the BP shareholders to the idea that the British major buy out AAR from TNK-BP for cash and stock was "much more positive" than for AAR's own proposal to buy 25 percent of TNK-BP. At the same time, it would provide AAR with diversification, liquidity and a long-term exit strategy. "Our objective is to be shareholders in a global company.

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