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 The loyalty comes as a surprise to many industry players,
particularly in light of the company's current woes which forced it
to suspend dividends this week and announce plans to sell new shares
to cut its $30 billion debt pile.
Rivals and hedge funds had already long bet the managers - some of
the world's top traders like Alex Beard for oil and Tor Peterson for
coal - would be unable to resist the temptation to cash out after
decades of service for the commodities giant.
"I had been honestly thinking most guys would be somewhere like in
the Bahamas by now. It is quite extraordinary that most of them are
still around," said a senior executive at one of Glencore's trading
rivals.
At the time of the $10 billion London flotation in 2011, a possible
exodus of management was a big concern among potential investors, so
Glencore <GLEN.L> imposed bans - or lock-ups - on selling shares for
stipulated periods after the listing.
The last of these expired in May this year, apart from those
constraining the CEO and finance chief - but not only have most of
the directors held onto their shares, they plan to buy more in the
new issue to prevent their stakes being diluted.
"We had calls from hedge funds recently asking if Alex or Tor or
somebody else sold out. No one did. And everyone will be investing
in a new equity issue," said a high-level source at Glencore.
Plans for the $2.5 billion issue were announced on Monday as the
mining and trading firm acknowledged the severity of a commodity
market slump, but the timing and shape of the issue have yet to be
decided.
"What we said to shareholders is that we do not wish to be diluted.
Any type of capital raising we do, the senior partners will be
participating. We think that is the way to go," said Chief Executive
Glasenberg.
LAST BILLIONAIRE STANDING
Glasenberg is known for running Glencore with an iron fist and
pushing through decisions, like he has done with most other crucial
moves, such as the $29 billion acquisition of miner Xstrata in 2012.
There is a rationale for a concerted show of confidence in
Glencore's stock, which has fallen to record lows this month - down
more than half this year - on fears of a major economic slowdown in
China that would hit copper, coal and oil consumption.
It is designed to show that most veteran managers believe the
company is seriously undervalued and stock prices will bounce back
once commodities market stabilizes.
One could also argue the directors became hostages of the market
downturn and that the stock has fallen so sharply that there is
little point in selling out now.
Since the listing, senior managers have been encouraged to hold onto
their shares by the bumper dividends from Glencore, which has paid
out a total of $9 billion.
And even now many, aged in their 40s and 50s, are not yet ready to
plan for a comfortable retirement. They are relatively young, and
still ambitious and hungry for corporate glory, according to sources
familiar with their thinking.
At the time of listing, Glasenberg's stake was worth $9 billion in a
company valued at $60 billion.
Fast-forward four years and his 8.4 percent holding, the second
largest after the Qatari Investment Fund, is worth $2.3 billion in a
firm valued at about $27 billion - despite the fact Glencore is
operationally much larger after buying Xstrata.
At Thursday's share price of 136 pence, Glasenberg with 1.1 billion
shares remains the only senior manager whose stake's paper value
tops $1 billion - compared with six at the time of the flotation.
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The co-heads of zinc, copper and lead, Daniel Mate and Aristotelis
Mistakidis, who own 417.5 million and 414.7 million shares
respectively, would be worth around $874 million and $868 million,
according to Reuters calculations.
Peterson and Beard with 366 million and 320 million shares would be
worth $766 million and $670 million respectively.
Smaller shareholders among managers also include Chief Financial
Officer Steven Kalmin with 71.5 million shares, the head of
ferrochrome Stuart Cutler with 78.6 million shares and the Chairman
of Kazzinc, Nikola Popovic, with 94 million.
BUMPER DIVIDEND
If the new equity issue of $2.5 billion goes fully ahead, the senior
managers would have to contribute 22 percent or $550 million, to
retain their current stake levels, by percentage.
Glasenberg would have to personally commit $210 million to the new
issue. Since the IPO he has collected over $700 million from
Glencore via dividends.
The CEO has repeatedly said he saw the relatively young management
team sticking with the company for many years.
Beard, in his late 40s, an Oxford-educated Brit has been with
Glencore since 1995, and Peterson, a Swiss-educated American in his
early 50s, has been with the firm since 1992. Spanish Mate and Greek
Mistakidis, both in early 50s, joined in the late 1980s or early
1990s, when the company was still called Marc Rich.
Beard, Peterson, Mate, Mistakidis, Kalmin, Cutler, and Popovic all
either declined to comment on were unavailable to comment.
Senior managers might, however, look with a certain envy at a small
number of their peers who managed to sell out before the stock
plummeted.
Back in 2012-2013, when the stock was worth two to three times what
it is today, the co-heads of aluminum Gary Fegel and Steven Blumgart
and the head of iron ore Christian Wolfensberger sold their
respective 154.8 million, 86.7 million and 87.4 million shares. And
Beard's right-hand man, Louis Alvarez, sold his 81.6 million shares
and retired this year.
Investec analyst Marc Elliott said remaining bosses were taking part
in the new issue as they believed Glencore could bounce back. "If
you are refinancing it and you want the rest of the market to step
in and help you finance it, you've got to do that," he said.
"By putting in meaningful sums of money, they are backing
themselves."
(Additional reporting by Sarah McFarlane; Editing by Pravin Char)
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