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Glencore Xstrata has just sold its big copper mining project in Peru Las Bambas for about US$5.8 billion. The company will be able to reduce its debt substantially thereby when the deal closes, even though they are coterminous buying a small Canadian junior oil company Caracal Energy, which has assets in Chad, for US$1.3 billion.
In the middle of such heady M&A stuff, it also becomes time for some routine administrative maintenance and, accordingly, Glencore Xstrata has just released the corporate materials for its forthcoming Annual General Meeting – this is now scheduled to be held in Zug, Switzerland at the Theater-Casino on May 20th, 2014.
In posting the notice of meeting and form of proxy for its voting agenda, all are pretty much non-controversial, though some investors might have been hoping for progress by the company in finding a permanent new independent Chairman of the Board. Instead, Anthony Haywood is proposed to continue in that role on an interim basis. Also, all the other six existing directors are up for reelection as well, or for three of them election for the first time, having been appointed after last year’s meeting.
However, there is one important change that jumps off the page as, having merged with Xstrata almost exactly one year ago, Glencore Xstrata is now proposing to change the name of the group back to its previous one, i.e. In future, it will be known again as a just Glencore PLC, as it was before the merger.
Whilst this was indeed predictable, and will even be much simpler to pronounce than the conjoined name, it does reflect the end of an important period in the company’s history, and could even be said to reflect perhaps its new beginning.
Xstrata itself was a much older corporate entity than Glencore, having been founded originally in Switzerland, in 1926, as a power company and infrastructure provider in Latin America. By 1990 the company had already turned to natural resources – four years before Ivan Glasenberg and his partners bought out their boss Marc Rich’s commodity business in 1994, and created Glencore. March Rich had founded his company Marc Rich & Co. in 1974.
Glencore and Xstrata first crossed paths via a number of commodities trading agreements then, in 2002 Xstrata bought the Australian and South African coal assets of Glencore, and Xstrata listed on the London Stock Exchange. Glencore by then was also the largest Xstrata shareholder. Glencore itself did not list its own shares until 2011, also on the London Stock Exchange.
By 2013 the rationale for having two separate publicly listed vehicles, a form of layered corporate structure to maintain control, weakened considerably compared to the idea of a merger by way of a share exchange. Such a consolidation would permit instead the enlarged equity base of a combined entity to be much stronger in carrying the large debt burdens associated with the rapid expansions both companies had entered into.
Accordingly the two companies merged in May 2013, as a major step in a programme of intelligent de-leveraging, one which continued with asset sales such as the Las Bambas sale itself which took place last week. Now it is all done Glencore is taking back its original name again.
Not many people will complain, I should think, as the new Glencore now seems much better equipped to deal with its current business and financial environments than the old one.
Ivan Glasenberg has several times criticized his peers in the mining industry for excess leverage based on commodity prices going to the moon; having also had to implicitly plead “mea culpa” himself, therefore, he has now managed the transition to the new era much better than many.