Goldman ‘furious’ as Glencore leaves bank out of $60bn listing

Vice-chairman of Wall Street giant phones boss of commodity trader seeking a share of London's biggest float
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The Independent Online

Goldman Sachs is said to be furious at being left out of the lucrative flotation of Glencore, the giant commodities trader which will make history when it becomes the biggest company to list on the London Stock Exchange for $60bn to be immediately propelled into the FTSE 100 index.

Goldman is the only one of Wall Street's big investment banks not to be included in the syndicate of nine handling the float, which are set to share $300m (£180m) in fees. Banking sources said yesterday that Goldman was not in the syndicate because Glencore's board felt there was no "need" to have the US giant on board.

However, sources claim Goldman's vice-chairman, Michael Sherwood, was so angry by the snub that he contacted Glencore's chief executive, Ivan Glasenberg, to try to persuade him to involve the bank. The flotation is likely to be the biggest this year, and will have a big effect on the league tables so beloved of Wall Street. Glencore declined to comment and Goldman was unavailable.

Citigroup, Morgan Stanley and Credit Suisse have been chosen to be the "global co-ordinators" for the Swiss-based trader which hopes to raise $9bn (£5.5bn) to $11bn when it sells up to 20 per cent of the company to investors in London and Hong Kong. A further 10 per cent may be sold if demand is good. The syndicate also includes joint bookrunners Bank of America Merrill Lynch and BNP Paribas, and co-bookrunners Barclays Capital, Société Générale, UBS and Liberum Capital.

Two other notable names missing from the line-up are JP Morgan and Deutsche but both are conflicted as they advise Xstrata, the mining group in which Glencore has a big stake and according to other banking sources, Glencore and Xstrata are expected to do a deal "by the end of the year".

Three members of the banking syndicate have had strong lending relationships with Glencore over the past decade, while Barclays Capital and BNP Paribas have both acted as lead arrangers on more than 40 syndicated loans for Glencore over the decade. SocGen has worked on 37.

Mr Glasenberg, has yet to explain the mysterious events leading to the confirmation of the group's new chairman, Simon Murray, last week. A South Pole explorer, former Foreign Legionnaire and Hong Kong businessman, Mr Murray was appointed on Thursday but only after media leaks had named Lord Browne, former BP boss earlier in the day.

The floatation stands to make multi-millionaires out of Glencore's staff – about 480 of them own more than half the company with Mr Glasenberg thought to own about 15 per cent, valuing his stake at $9bn, and another 65 traders own shares worth $500m each. The Basel-based trader had sales of $145bn last year, $5.3bn in earnings before interest and tax, employs 3,000 people in trading and 54,800 across 30 countries in its mining operations.

A large part of its earnings – more than 60 per cent in its last results – come from mining but its commodity trading business controls 60 per cent of the world's third-party zinc market, 50 per cent of the copper market, 45 per cent of lead and almost a third of thermal coal as well oil and grain.

With the bull run in commodities predicted to end, Mr Glasenberg will have to persuade investors there is scope for growth, other than by takeovers. Analysts have tipped the Xstrata deal, and others suggest Anglo American and French agriculture group Louis Dreyfus may be targets.

The stronger Glencore's stock market value, the more firepower it will have to launch takeovers. Analysts say it could be valued somewhere between eight and 14 times this year's forecast earnings of $6.4bn. The midpoint of that range would value it at $58.8bn.

Cameron Peacock of IG Markets said: "If you are willing to look past short-term aberrations in the market, the outlook for commodities and stocks over the next 12 to 18 month period is buoyant."

Glencore, founded by Marc Rich in the 1970s, was accused of paying kickbacks to Iraq in 2005 by a commission investigating the UN's Oil for Food programme, although a preliminary judicial investigation found "a lack of culpable information". It was fined $700,000 for environmental violations in Colombia in 2009.

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