Margareta Pagano: How does it feel to be Glencore's $10bn man?
Sunday 15 May 2011
The question I just had to ask Ivan Glasenberg, chief executive of Glencore International, when we chatted last week was what it feels like to be worth $10bn – the amount he'll be valued at on paper when the mining giant floats next week.
The South African accountant laughed out loud: "Haven't thought about it – I'm too busy with the float, but it's not going to change my life. Anyway, I've promised not to sell for five years or until I leave – or they kick me out."
Of course they won't be kicking Glasenberg out, nor is he likely to be leaving any time soon. But his answer is a clue to another big question that has been bugging me about the listing of this $60bn colossus. Why is a firm with a turnover of $145bn and a return on equity of 38 per cent, bothering with all the hassle of a flotation? Opening up the books has already unleashed grief from the media, from criticism over corporate governance to tax avoidance in Zambia.
By all accounts, the private Glencore story has been a stunning success – over the past two decades Glasenberg has turned an obscure commodity trader into one of the biggest natural resources companies in the world, with huge market shares in mining and trading and the shipping of some of the world's most precious resources.
It has gone from being a trader to a giant logistics company which ships coal and other raw materials from one side of the world to another, trading on the prices as it moves the goods.
Glencore didn't need the funding – it has been a big player in the capital markets for a decade, raising money from private investors and billions from bond issues from the top banks. And the 485 partners, including Glasenberg, aren't exactly poor.
So why bother? Glasenberg couldn't say any more to me; he's unable to talk publicly in case it's not in the 1,600-page prospectus. But my impression from advisers is that the decision to go for an IPO was taken reluctantly. But it was taken precisely so that partners can exit by selling shares. While Glencore was a pure trading firm, this was easy to do. But the business has grown big by buying mines and other assets and now its capital is tied up. As Glencore wants to buy more physical assets, such as mines or trains, it realised access to a permanent capital structure was the best option, hence the float. This allows it to pay out staff and fund Glencore's third stage of growth.
Most of the UK's big fund managers will want the shares – set to shoot into the FTSE 100 – so we'll all own Glencore via our pensions. It looks as if the shares will be priced in the mid-way between 480p and 580p as bankers will want some upside in the after-market. Investors I've talked to want to know how Glencore values the third – logistics – part of the business, and that's what they've been quizzing Glasenberg on most, on the road shows. Even if the commodities boom has topped out – which is unlikely, with so much raw-material demand still in China and India – investors say they like the stock as a defensive play.
Having been private for so long also means that Glasenberg and his partners – who still own 80 per cent – are not going to want to throw away their wealth by spending too much on expensive acquisitions. These are cut-throat traders – they won't want to see their paper diluted either.
As to what he will do with his fortune, Glasenburg says: "Ask me again in 15 years." Don't worry we will.
Too many rules, too little lending, says Medef's crusader
Laurence Parisot hasn't had the easiest of jobs – as head of Medef, the French equivalent of the CBI, she's had to work hard to push through a radical business agenda in what is a traditionally socialist country where state and enterprise are closely entwined.
She's had some success, persuading President Sarkozy to increase the retirement age, and, more recently, she was behind the move to introduce quotas for women on boards. Her next project is to get extended paternity leave for men.
It's not surprising Parisot, who has won another term as Medef chief, has made a name as a corporate crusader; taking on unions and the state is no easy feat in France. Spend a few minutes with her, as I did last week when she was in London, and you can see why: she's thoughtful and very sharp.
Under this year's French presidency of the G20, the B20 will be hosted by Parisot this autumn. She is working flat out to co-ordinate responses on issues such as introducing multilateral safety standards for the nuclear industry following the Japanese tragedy.
But top of her list is bank lending, or rather the lack of credit for small businesses. French firms have the same difficulties as those in the UK finding new funding. Her main worry is that Europe's big banks are pulling in their horns too strongly, forced to be conservative following the new capital ratios introduced by Basel 3.
And the politicians are to blame. Parisot reckons they are overdoing the rules because they need to show they're controlling the banks. "But it's a short-term view," she says, "and could be very damaging. It's time they learnt primum non nocere." This, as any young doctor knows, means, "first, do no harm". Wise words. If only they'd put down their rule books, and listen.
Boots, in this heat? SuperGroup blames soaking on the weather
To buy or sell? That's the pertinent question after SuperGroup's shares fell so sharply last week. The drop was triggered when the fashion retailer admitted it hadn't got enough flip-flops or espadrilles on to the shelves in time for the unseasonally hot spring.
In a PR disaster, boss Julian Dunkerton confessed he hadn't been able to switch quickly enough to meet the demand for lighter clothing and that it had only opened one new shop in the period, although more are due soon. But the squeeze on the shares – down 22 per cent or 347p to £12.26p – was overdone and most of the scribblers still put a £20 target price on the shares. SuperGroup is still young – it's only been public for a year. Dunkerton should be thankful to have an early taste of what it feels like to have bears on the prowl. Looks like a good chance to buy.
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