Glencore

Glencore takes step closer to flotation. (AFTER DERIPASKA OPA)December 23 2009 19:49. Glencore, the world’s dominant commodity trader, has taken its first step towards becoming a public company by issuing up to $2.2bn in convertible bonds to strategic investors in the US, Singapore and China. The issue, which values the publicity shy, Switzerland-based company at $35bn, has been taken up by First Reserve, the US-based private equity group which focuses on natural resources, GIC, Singapore’s sovereign wealth fund; US-based BlackRock; and Zijin Mining Group, the Chinese miner. “This is a clear step towards an initial public offer,” a commodities banker said. “The mix of investors is the typical you expect in a pre-initial public offering operation.” Glencore said in a statement that the bonds were convertible “into Glencore shares upon a qualifying IPO or upon other pre-determined qualifying events”. An IPO would trigger massive windfall gains for many of Glencore’s employees, who own the firm, including Ivan Glasenberg its South African chief executive. However, a flotation is unlikely in the short term as the trading house could wait for a bigger rise in commodities prices to achieve an even higher valuation, according to people familiar with the trader. “As economic growth resumes, the outlook for most commodity markets is continuing to improve,” Glencore said in a statement. Bankers said that the company’s estimated $35bn valuation was above the current market’s expectations. Glencore dwarfs its rivals in terms of size and the number of raw materials it trades. It also owns a variety of mining assets and companies. The value of its 34.5 per cent stake in Xstrata, the blue-chip mining company, has risen from £2.2bn ($3.5bn) to £10.9bn this year. Glencore’s net income more than halved in the first half of the year to $1.12bn, down from $2.63bn in the same period of 2008 due to the drop in commodities prices. Revenues dropped to $45.2bn. The proceeds of Glencore’s capital raising could enable it to buy back from Xstrata the prized Prodeco coal complex in Colombia. Glencore agreed to sell this asset to Xstrata for $2bn in January to take up its share of Xstrata’s rights issue. The company’s increasing openness further moves it away from its roots under Marc Rich, the oil trader who founded Glencore in 1974, but later sold out to management. In 1983, Rudolph Giuliani, then a US prosecutor, indicted Mr Rich for tax evasion and he became a fugitive in Switzerland. On leaving office in 2001, President Bill Clinton pardoned Mr Rich. The association with Mr Rich, while severed long ago, added to the company’s reputation as a secretive player with “black box” strategies and positions.

Alrosa appointment signals change. Alrosa announced on Tuesday that it has appointed Vasily Grabtsevich as a special senior executive for managing relations between the two controlling shareholders of the company, the federal government in Moscow and the Sakha republic government in Yakutsk. The federal government controls almost 51% of the closed shareholding of Alrosa; Sakha controls 40%. The creation of the new executive post at the vice president level, and the naming of a trusted subordinate of regional president, Vyacheslav Shtirov, indicates the extent to which the new Alrosa CEO, Fyodor Andreyev, is intent on eliminating informal mechanisms and mediators, who have dominated the sensitive inter-government relationship under previous chief executives, Alexander Nichiporuk and Sergei Vybornov. It also appears to be the first public signal that the behind-the-scenes power of Otar Marganya has come to an end, as Alrosa sources have also claimed. Marganya, officially an executive of state bank VTB, was the acknowledged grey cardinal of the company and advisor of the board chairman, Finance Minister Alexei Kudrin. Insiders believe Marganya helped orchestrate the replacement of Nichiporuk with Vybornov in February 2007. Marganya's influence has waned as a result of the ouster of Vybornov in July of this year. Grabtsevich, 59, comes from Belarus, and trained as a civil engineer in the Siberian city of Tomsk. Since 1976, he built almost his entire career in diamond enterprises of the Sakha republic, save for a three-year stint building power stations in Cuba. In 1998 he became deputy head of the Mirny regional government, and from 2002 a senior member of the Sakha government. His rank until this month was first deputy chairman of the cabinet under Shtirov. Andreev's announcement says Grabtsevich "will supervise issues of the interaction between the public authorities of the Russian Federation and Republic of Sakha, and also the licencing of Alrosa."

4 killed in explosion at Osaka chemical plant. Thursday 24th December, 11:55 AM JST. TOKYO. Four men died in an explosion Thursday at a chemical plant in Osaka, firefighters said. The blast occurred at around 8:50 a.m. at a fluorine compound production plant operated by Morita Chemical Industries Co in Osaka’s Yodogawa Ward. Those who died in the blast appear to be Kazuhiro Hayashi, 47, Tomoyuki Kanazawa, 33, Tatsuya Nakatani, 45, and Keisuke Nishida, 30, police said. The explosion occurred when the four workers were cutting away the top of a chemical tank as part of efforts to clean it. The tank stores a toxic chemical material called borontrifluoride. The firefighters said part of the plant’s roof was blown off in the blast. Two of the four victims were found collapsed on the roof of the third floor while the remaining two were found lying on the ground. Morita Chemical Industries, an unlisted chemical maker based in Osaka’s Chuo Ward, said it produces fluorine compounds for industrial use at the plant. The chemicals are used in semiconductor production and as electrolytic solutions for lithium batteries, it said. Usually, fluorine compounds are unlikely to explode, the company said. Founded in 1935, Morita Chemical Industries produces and sells hydrofluoric acids, fluorine compounds and various other chemicals as well as pharmaceutical products, the company said on its website. The plant is located in a housing-industrial complex some 1.5 kilometers north of Shin-Osaka Station, the Osaka terminal of the Tokaido Shinkansen bullet train line.