Glencore float stirs up awkward issues

By ALEX BRUMMER FOR THE DAILY MAIL
Updated: 03:47 EST, 4 May 2011

The advisers to Glencore have chosen a good day for the release of the prospectus on the biggest flotation in the history of the London stock market.

Sandwiched between the death of Osama Bin Laden and the referendum on the Alternative Vote the extraordinary story of how chief executive Ivan Glasenberg and his partners transformed renegade commodity trading group Marc Rich into a natural resources powerhouse will receive less attention than it should.

But in a world in which income inequality grows ever larger and is still suffering the after effects of the greatest financial panic for more than a century the sight of a bunch of new billionaires being created on the back of mines in some of the most needy and divided parts of Africa will be a cause of unease.

Glasenberg himself is expected to come out of the float with a personal net worth of up to £6bn. At least three of his senior colleagues could be dollar billionaires too.

All of this makes the flotation of Goldman Sachs 12 years ago look minor league.

With such so much at stake in the $12.1bn (£7.4bn) initial offering the fleet of advisers will price cautiously. Its success will be helped by backing from global funds including the Government of Singapore Investment Corporation, a Middle East sovereign wealth fund as well as asset managers Black Rock and Fidelity.

As the company is going to be quoted in London Glasenberg also is hopeful of attracting long-term UK funds. The float will give Glencore the currency it needs to become even larger.

Glasenberg's initial hope had been to come to the market through a merger with its 39% owned mining offshoot Xstrata run by former associate Mick Davis.

The pricing issues proved too complicated but once he is armed with quoted shares one can imagine Glasenberg coming back for the minority.

Aside from the fact that Glasenberg settled on Simon Murray as chairman, a person with out-dated views of women, Britain and other things, the corporate and social responsibility mavens ought to have a field day.

It is disturbing that one trader should hold such strong physical positions in the markets for key natural resources.

Glencore argues that it is the financial traders, who have burst onto the scene, which are among the causes of surging prices and the ill-effects they are causing across the global landscape from North Africa to our own supermarkets.

We will take his word. But this is not the last we will hear of Glencore's uncomfortable grip on illiquid commodity markets.

Fred's silence

The letter written by Financial Services Authority chairman Lord Turner on December 15 last year is unequivocal. 'We would suggest delivering the report (on Royal Bank of Scotland) to the government and the Treasury Select Committee by the end of March.'

More than a month has now passed since that self-imposed deadline and impatience is growing. As we report today the Business Secretary Vince Cable, who takes a major interest in the future shape of British banking, wants to see immediate publication.

This after all is a report into the most serious calamity ever to befall a British bank, has gobbled up countless billions of taxpayers and investor money and left Her Majesty's government holding an 84% stake.

So why the unacceptable delays? As Turner warned there are legal issues to be confronted. Publication would require the permission of Royal Bank of Scotland and third parties – mainly former RBS chieftains.

RBS makes it plain that it has co-operated. Indeed, its chief executive Stephen Hester wants the report out there as means of clearing the air.

So the main obstacles are understood to be former Royal Bank of Scotland chief executive Sir Fred Goodwin who appears willing to use any legal means possible to prevent the content of his private behaviour in a very public role as chief executive reaching a wider audience.

It is fine for the taxpayer to pick up the bill, but we are prevented from examining the strategy which landed the bank in the mess. His colleague Jonny Cameron, former head of global markets, has less to lose in that he already reached a negotiated disciplinary deal with the FSA.

The public interest is paramount and the FSA should publish and be damned.

Melted desire

We had such high hopes for chocolatier Thorntons as a national champion after Kraft gobbled up dear old Cadbury. But it is ill-prepared for the role.

A hot Easter, which melted eggs, has proved as damaging as the Arctic winter. Chief executive Jonathan Hart needs to buy some better long-range weather forecasts.