Listing of commodity trader will make chief executive and four others into paper billionaires
Glencore's chief executive, Ivan Glasenberg, will become of Europe's richest men with a paper fortune of nearly £6bn once the Swiss-based commodity trading firm floats later this month. The massive listing will value the company at about £37bn – bigger than Tesco and nearly twice the size of insurer Prudential.
The 54-year-old's 15.8% stake, which immediately places him in the top 100 of the world's billionaires, was revealed in Glencore's bumper 1,566-page prospectus. The secretive trading group also revealed it will create four further paper billionaires among its staff.
Daniel Maté, 47, and Telis Mistakidis, 49, the co-directors responsible for zinc, copper and lead, will be worth about £2.22bn each on the back of their 6% holdings in the new publicly listed company. Tor Peterson, 46, director of coal and coke, and Alex Beard, 43, director of crude oil and oil products, will be worth £1.97bn and £1.7bn respectively.
Glasenberg, the only one of the quintet of new billionaires who will sit on the board, will be subject to a five-year "staggered" lock-up, whereby he will only be allowed to sell 20% of his holding each year, although he has said that he will not sell any shares while he remains at the company. Other key employees will be subject to one-, two- and four-year lock-ups, but any employee can quit during those periods without forfeiting shares.
The possibility that some staff may choose to leave the firm is identified by Glencore as one of the 45 risks of the flotation. The prospectus states: "An employee may leave Glencore to go to a competitor, to start their own business, to retire or for other reasons", with the document adding that existing shareholders will suddenly be worth significantly higher sums.
Glencore insisted that it did not expect "an above-normal level of retirements" following the float. Even so, to retain staff the trading group admitted that it may have to increase rewards in the future. It has set aside $210m (£126m) to keep hundreds of key employees who are not shareholders, primarily in the company's 2,700-strong marketing department. These employees cannot leave if they want to cash in, as the group has awarded them "phantom equity" which vests on or before 2013, "subject to the continued employment of the award holder".
The document adds: "Glencore may need to change its compensation arrangements to make them more attractive to such employees which could be at an increased cost to Glencore. The loss of any senior marketer, senior manager or other key personnel, as well as the inability to retain and/or attract new highly skilled personnel, could have a material adverse effect on Glencore's business."
The prospectus, by far the most revealing record of the guarded firm, was released as the company set a 480p-580p per share price range for the London listing that values the group at £36.5bn at the middle of the range. It also revealed how Glencore employees are not the only ones in line for massive windfalls. A roll call of 23 banks helping with the float will share a fees bonanza worth £165m, linked to underwriting the issue and promoting the IPO that will be the biggest ever on the London stock market.
Glencore is also listing on the Hong Kong exchange and 3.5% of new shares issued are reserved for Hong Kong retail investors.
New shareholders will be buying into the world's biggest commodities trader, which generated revenue of $145bn in the year to 31 December 2010 and on profits of $5.3bn, up 61% on 2009.
On Wednesday the company said its performance in the first quarter of 2011 "continued to benefit from improved market conditions". Glasenberg added: "Strong markets experienced in the first three months of the year are continuing into the second quarter of 2011. In this regard, the directors reconfirm its intention to declare a $350m interim dividend in August 2011."
Out of the $10bn that Glencore is expected to raise from the float, around $5bn will be used for planned capital expenditure over the next three years, while $2bn has been set aside to increase the company's stake in Kazzinc in Kazahkstan.
Glencore is also likely to bid for Xstrata, the mining group in which it already owns a 35% stake. On Wednesday Xstrata endured its own pay controversy when 40% of shareholders failed to back its annual executive pay report.
Glencore was founded in 1974 by the controversial Marc Rich and shed its creator in the mid-1990s before developing into the one of the world's largest, but lowest profile, companies.
Remuneration at the firm has until now been kept secret, but the prospectus shows Glasenberg will earn a salary of £925,000 a year, and will be entitled to a bonus of up to twice that.
Simon Murray, the controversial chairman who was forced to apologise after making comments on the role of women in business, will be one of the best-paid FTSE chairmen, with annual fees of £675,000.
Driven workaholic
Ivan Glasenberg is the 54-year-old South African at the head of Glencore; and until recently it was the biggest company you have never heard of.
With a steely disposition and an insatiable appetite for work, friends say he is at the top of his game and not in the least fazed by his recent gruelling investment roadshow, which has involved working 16-hour days.
But Glasenberg has been angered by suggestions the company is floating only so the partners can cash in their shares. He said: "We are all invested for the long-term. No one is taking money off the table. As long as I am working for Glencore, I will not be selling shares."
Once a champion race walker, Glasenberg nearly took part in the 1984 Olympics, but South Africa's exclusion over apartheid prevented him participating. Everyone agrees he is driven, but he doesn't relish the limelight, rarely talking to the media and – before the announcement of the IPO – reluctant to discuss the inner workings of his company. With a degree in accountancy from the University of the Witwatersrand in South Africa and an MBA from the University of Southern California, Glasenberg has been chief executive of Glencore since 2002. But he joined the business in 1984 as a coal trader in South Africa, shifting around the globe to Australia, Hong Kong and Beijing on his way to the top.
In a 2005 article in Business Week, he was identified at one of "The Rich Boys" – the Glencore elite who had learned their trade from the firm's founder, Marc Rich, who fled to Switzerland when he was charged by US authorities with selling oil to Iran during the 1979-81 hostage crisis. Rich was pardoned by Bill Clinton on the president's last day in the White House.
Competitors say Glasenberg is a shrewd operator. "And he is incredibly well-connected," said one banker. "You just wouldn't believe it."
Richard Wachman