Secretive trader prepares to open up

Switzerland's Glencore is considering plans for what is set to be one of the biggest listings of the year. Nikhil Kumar reports

There is little overlap between Tony Hayward and Marc Rich apart from years of experience in the commodity markets. The former was the chief executive of BP until he was forced to step down in the wake of the devastating Gulf of Mexico oil spill last year. The latter was once a leading commodities trader who was indicted for tax evasion, charged with tax fraud, but then pardoned with a stroke of Bill Clinton's pen in the final days of his presidency.

But if they met this week, the conversation might well focus on a more specific topic, namely the trading house founded by Mr Rich in 1974.

The company, which was set up in Switzerland as Marc Rich and Co, swiftly grew into one of the world's biggest players in the business of raw materials.

He sold his interest in 1994, when the company was renamed Glencore, the commodities trader which this weekend was reported to be looking at potential candidates – including Mr Hayward and Chip Goodyear, the former chief executive of BHP Billiton – for a revamped board ahead of a possible listing later this year.

The privately held group, which is believed to have around 500 shareholders drawn from the ranks of its employees, is known for holding its cards close its chest.

For months, the talk in the market was that it was studying a merger with Xstrata, the FTSE 100 listed mining giant in which it owns a stake of around 35 per cent.

But the issuance of a $2.2bn convertible bond in 2009 triggered expectations of an independent float, one that could see Glencore raising between $7bn to $8bn, according to recent reports.

Speculation at the end of last year suggested London was the venue of choice but more recently it is said to be weighing up the possibility of a dual listing in London and Hong Kong. Bankers from Citigroup, Credit Suisse and Morgan Stanley are believed to be working on the offering, which, if it comes about, would be one of the biggest flotations of the year. If it goes for the Hong Kong route, the listing would be the biggest foreign float in the exchange's history.

And yet, even as dealers ready themselves for the blockbuster offering, we know little about the inner workings of the business, which made its first equity investment in an industrial asset in 1987, acquiring a 27 per cent stake in the Mt Holly Aluminium smelter in the US.

Based in Baar, Switzerland, its current board is populated by insiders and is led by chairman Willy Strothotte, who joined the business in 1978 and rose through the ranks to become chief executive in 1993.

He was both chairman and chief executive from 1994, the year that Mr Rich sold out, to 2001, when the roles were split.

Ivan Glasenberg, formerly the head of Glencore's coal department, became chief executive in 2002. He is believed to be looking at options to reshape the board as a listing would necessitate compliance with corporate governance norms that call for the appointment of an independent chair and independent non-executive directors, among other things.

Despite its secrecy about its inner workings – something that analysts say is to be expected given its long history as a private company – there is little doubt about its size and influence. "It is very important and very big indeed," Martin Potts, an equity analyst at Daniel Stewart, said, pointing out that if Glencore were based and listed in London, it would be among the top blue chips in the FTSE 100 index.

Just how big and how important is evident from a cursory glance at its vast operations. It employs more than 2,000 people in its global marketing operations in some 50 offices spread over 40 countries. Its industrial operations are even bigger, employing over 50,000 people at 15 plants in 13 countries.

Operations span the commodities markets. The business is organisation around three main divisions. The metals and minerals group deals in everything from aluminium to copper, nickel and lead, while the energy products division encompasses crude oil and coal. Glencore is also active in the agricultural commodities markets, dealing in wheat, maize, barley, edible oils, sugar and oil seeds.

All this before we count Glencore's collection of stakes in publicly listed companies such as Xstrata.

The holding in the Anglo-Swiss mining giant is supplemented by a 44 per cent interest in the US group Century Aluminium, approximately 71 per cent of Minara Resources, one of the world's top 10 nickel producers, and nearly 75 per cent of Katanga Mining, which operates a large-scale copper-cobalt project in the Democratic Republic of Congo.

Glencore also has stakes in Chemoil Energy, Recylex and in Rusal, one of the world's largest aluminium producers with an annual production capacity of 4.4 million tonnes of primary aluminium.

In terms of the bottom line, net profits for the first nine months of 2010 rose by more than 40 per cent to $2.5bn. Underlying earnings climbed by nearly 60 per cent to $4.1bn over the same period, while net profits for the third quarter of the year jumped to $979m – the highest level since the world economy slumped in 2008.

Thought the timing remains unclear, recent speculation suggests that Glencore may unveil its listing plans as early as March, when it posts annual results. Among the issues on the agenda include the future of its relationship with Xstrata, with recent speculation suggesting that, once investors have a better handle on Glencore's valuation following the listing, they may be more in the mood for a merger.

But why go public in the first place? The answer lies the way the commodities market has changed over the last decade or so, according to sources familiar with the matter.

Rising commodity prices, and the worldwide rush to secure new resources, has driven up the cost of buying up mines.

Going public would bolster Glencore's resources, allowing it to expand in ways that would be beyond the reach of a private company, even one as large as itself. But it would also force the trader to open up to the increased scrutiny that comes with a float. Only time will tell how it adjusts to the change.

Start your day with The Independent, sign up for daily news emails
general electionThis quiz matches undecided voters with the best party for them
Arts and Entertainment
Keira Knightley and Matthew Macfadyen starred in the big screen adaptation of Austen's novel in 2005
tvStar says studios are forcing actors to get buff for period roles
Prince William and his wife Catherine, Duchess of Cambridge show their newly-born daughter, their second child, to the media outside the Lindo Wing at St Mary's Hospital in central London, on 2 May 2015.
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Trainee Consultant - Surrey/ South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before