Glencore plc is an Swiss multinational commodity trading and mining company with headquarters in Baar, Switzerland. Glencore’s oil and gas head office is in London and its registered office is in Saint Helier, Jersey. The current company was created through a merger of Glencore with Xstrata on 2 May 2013.[4] As of 2015, it ranked tenth in the Fortune Global 500 list of the world’s largest companies.[5] In the 2020 Forbes Global 2000, Glencore International was ranked as the 484th-largest public company in the world.[6] As of July 2022, it is the world’s largest commodity trader.[7]
As Glencore International, the company was already one of the world’s largest integrated producers and marketers of commodities. It was the largest company in Switzerland as well as the world’s largest commodities trading company, with a 2010 global market share of 60% in internationally tradable zinc, 50% in internationally tradable copper, 9% in the internationally tradable grain market and 3% in the internationally tradable oil market.[8][9][10]
Glencore had a number of production facilities all around the world and supplied metals, minerals, crude oil, oil products, coal, natural gas and agricultural products to international customers in the automotive, power generation, steel production and food processing industries.[9] The company was formed in 1994 by a management buyout of Marc Rich + Co AG (itself founded in 1974).[9] It was listed on the London Stock Exchange in May 2011 and was a constituent of the FTSE 100 Index.[11][12] It had a secondary listing on the Hong Kong Stock Exchange, but it has withdrawn from January 2018.[13] Glencore’s shares started trading on the Johannesburg Stock Exchange in November 2013.[14] The Qatar Investment Authority is its biggest shareholder as of 2016.[15] In March 2022, Qatar’s Sovereign Wealth Fund announced it would sell a stake worth £812 million (US$1.1 billion) in Glencore Plc.[16]
1974–1994: formation and sale
The company was founded in 1974 as Marc Rich & Co. AG by commodity traders Marc Rich and Pincus Green. In 1993, a number of Marc Rich employees, led by Claude Dauphin, left to set up another trading company, Trafigura.[17][18] In 1994, after failing to take control of the zinc market and losing $172 million, Rich was forced[19][20] to sell his majority share in the company to Glencore International, the commodities trading and industrial company.[21] Glencore’s name is an abbreviation of “Global Energy Commodity Resources”.[22]
2005: dealings with “rogue states”
The Australian Broadcasting Corporation’s Radio National reported in 2005 that Glencore “has been accused of illegal dealings with rogue states: apartheid South Africa, USSR, Iran, and Iraq under Saddam Hussein”, and has a “history of busting UN embargoes to profit from corrupt or despotic regimes”.[23] Specifically, the CIA found that Glencore had paid $3,222,780 in illegal kickbacks to obtain oil in the course of the UN oil-for-food programme for Iraq. The company denied these charges, according to the CIA report quoted by ABC.[23][24]
2005–2011: Glencore, Dan Gertler, and the Congo
In 2005, proceeds from an oil sale to Glencore were seized as fraudulent gains as part of an investigation into corruption in the Democratic Republic of Congo.[25]
In 2007, Nikanor was merged into Katanga in a transaction valued at US$3.3 billion.[26]
In May 2011, the company launched an IPO which valued the business at US$61 billion[27] and created five new billionaires.[28] Trading was limited to institutional investors for the first week and private investors were not allowed to buy shares until 24 May 2011.[29]
2011: financial and accounting manipulations
In 2011, five non-government organisations filed a complaint to the OECD against a subsidiary of Glencore over allegations that a mine it owns in Zambia may not be paying enough tax on its profits. This complaint was due to alleged financial and accounting manipulations that had been supposedly performed by the two companies’ subsidiary, Mopani Copper Mines Plc (MCM), to evade taxation in Zambia.[30][31] A draft Grant Thornton report alleged that tax avoidance by Glencore in Zambia cost the Zambian Government hundreds of millions of dollars in lost revenue.[32] The avoidance was allegedly facilitated through transfer pricing and inflated costs at Glencore’s Mopani Copper Mine, which is controlled through the British Virgin Islands, a recognised tax haven.[32] Glencore and its own auditor, Deloitte, rejected these allegations.[33] As of 2013, Glencore’s payments to Zambia’s government had increased.[34]
Due to weak global prices for the assets Glencore owned, particularly coal and copper producers, and for the commodities in which Glencore traded, the company showed a net operating loss of $676 million for the first half of 2015, and the company’s stocks fell, as a result.[35] Concerns cited by financial analysts to explain the falling stock price included a weak global commodity market and Glencore’s high level of debt,[36] $30 billion. The company reduced its debt by selling off stock and assets.[35]
2011: associations with other mining companies
Along with several other major coal producers, Glencore is also a large shareholder in globalCOAL, the online physical coal trading platform. The board of globalCOAL contains a number of power utility shareholders. Relationships also exist with Century Aluminum Co. (CENX; 44% economic ownership interest)[37]) in the US; Glencore partial subsidiary Minara Resources Ltd (AU:MRE), a 70.5% stake in one of Australia’s top three nickel producers[37]);[38] and 8.8% in United Company Rusal (HK:486), the Russian aluminium giant that went public in 2010.[37]
In mid-2011, Century was called “one of the most harrowing stocks of the past few years” but identified as a risky but potentially profitable investment for the future.[39]
2011–2012: initial public offering
Glencore was the subject of an initial public offering (IPO) in May 2011 in a dual listing in London and Hong Kong valued at about $US60 billion. The 1,637-page document revealed invaluable information about this private company that has remained discreet for thirty-seven years. Ivan Glasenberg’s shareholding was diluted from 18.1% before the IPO percent to 15.8% afterwards. Daniel Mate and Telis Mistakidis, zinc, copper, and lead co-directors were diluted from 6.9% to 6%. Glencore went public to raise gross proceeds of around $10 billion. According to Reuters, Glencore is known for its “opportunistic but lucrative acquisition strategy.”[40]
In May 2011, United Arab Emirates state-owned Aabar Investments confirmed an investment of $850 million in Glencore International plc as a cornerstone investor with an intention to invest an additional $150 million in the Global Offer. The investment made Aabar the largest cornerstone investor in the initial public offering (IPO) and the largest new shareholder of Glencore after its IPO, giving Aabar a 1.4% stake. The two firms intend to explore areas of co-operation.[41][42]
In November 2012, Abu Dhabi’s Aabar Investments, a unit of Abu Dhabi’s state-owned United Arab Emirates International Petroleum Investment Company, wrote off more than $392-million of its $1-billion investment into Glencore’s IPO less than two years after investing it. Aabar Investments was the largest new shareholder in Glencore.[43]
2012–2013: merger with Xstrata
Prior to its merger with Xstrata, Glencore is reported to have served as a marketing partner for the company.[44][45] As of 2006, Glencore leaders Willy Strothotte [de] and Ivan Glasenberg were on the board of Xstrata, which Strothotte chaired. According to The Sunday Times, by 2006, Glencore controlled 40% of Xstrata stock and appointed Xstrata CEO, Mick Davis.[44][46] In February 2012, Glencore International Plc, agreed to buy Xstrata Plc for £39.1 billion (US$62 billion) in shares. Glencore offered 2.8 new shares for each Xstrata share in agreed all-share “merger of equal”. It is the biggest mining takeover ever, and after approval would create an entity with 2012 sales of US$209 billion.[47] In June 2012, Glencore and Xstrata began to reconsider the proposed retention package for their merger, following shareholder opposition to a huge payout for executives. In total, 73 key executives stood to receive over GBP 170 million under the initial retention package.[48]
In October 2012, BBC News reported that Glencore had more ships than the British Royal Navy. Glencore’s operations in 40 countries handled 3% of the world’s oil consumption. Xstrata’s operations in more than 20 countries employed 70,000 people. According to mining analyst John Meyer, if the two companies merged into Glencore Xstrata, they would be the 4th largest commodities trader in the world.[49]
Just before completing its forced April 2013 takeover of mining rival Xstrata as it awaited Chinese regulatory approval for its long-planned merger, the world’s largest diversified commodities trader, the annual income of Glencore fell 25% percent, as its trading division offset the impact of weak commodity prices. Including the impact of an impairment related to a reclassification of its holding in Russian aluminium producer RUSAL, net income fell 75%.[50] On 2 May 2013, it completed the merger with Xstrata.[4] On 20 May 2014, Glencore Xstrata changed its name to Glencore plc.[51] After the merger with Glencore, Xstrata CFO Trevor Reid announced that he would no longer work as employee but would become a consultant. After 11 years of involvement, this marked a massive shift in the company’s strategy and Xstrata was entering a post-Reid era.[52]