Glencore investors take huge amount on trust

By Alex Brummer for the Daily Mail
Updated: 04:00 EDT, 5 May 2011

Everything about the Glencore float is whopping. The prospectus, weighing in at 1,637 pages, is so big that it even dwarfs the stack of budget documents issued when Gordon Brown was Chancellor.

It occupied more than enough mega-bytes to freeze up IT systems across the Square Mile and beyond.

All the numbers are mind boggling. As widely trailed, the genius behind the enterprise, Ivan Glasenberg, becomes a dollar billionaire ten times over, and five of his colleagues – including London oil trader Alex Beard – will be joining the Forbes list of billionaires.

Against this lot, the investment bankers, picking up fees of £264m, could not be blamed for thinking of themselves as paupers.

What the document demonstrates is that the so called 'cornerstone' investors led by Aabar, an Abu Dhabi vehicle, are taking an enormous amount on trust.

No one could fully understand the complex global network of commodity and mining relationships which Glasenberg and his team have to manage. Pity the people who have had to do the due diligence on this and come to grips with the host of minority stakes.

Moreover, because so many of the world's most valuable resources are in the most dodgy parts of the world – such as the Democratic Republic of Congo – the risks (however widely spread) are very large.

Glasenberg's appetite for hard work is renowned and he isn't done yet, which is what makes this offer so intriguing.

Among other things, he is interested in bolstering his oil holdings. So who knows, maybe with Tony Hayward on the board it may not just be Xstrata in his sights but BP too.

An initial public offering on this scale offers some interesting challenges for the authorities too. Do Glencore's powerful positions in vital natural resources markets, now much more in the public domain than previously, pose a threat to free markets and could anti-trust authorities want to become involved?

Does the London Stock Exchange need to re-think the FTSE 100 so that then weight of mining and natural resource stocks does not blot everything else out? How happy should private investors in pension funds and the like be about holding a chunk of Glencore?

Most importantly of all, will Glasenberg sign the Warren Buffett pledge to give away all his wealth?

That will be the moment worth waiting for.

Next day

Economics is not called the gloomy science for nothing. Even the Chancellor would be hard put to find much optimism in the latest data. It suggests that the housing market is in a fragile state, the construction sector is weakening and shop prices are rising sharply.

Certainly there is real pain in parts of the economy, with some fragile retail chains such as Focus DIY following others, like Oddbins, into the knackers' yard.

But before anyone dons the sackcloth and ashes it is worth talking a look at Lord Wolfson's Next, which had an astonishingly good first quarter with total sales up 5.2% against market expectation of 1% to 1.7%.

The numbers look a little less impressive on a same store sales basis which shows them to have been down 3%. Quite a difference!

Nevertheless, the factors behind the Next renaissance are fascinating. It attributes the big gains to the fine weather and spending over Easter and in anticipation of the Royal Wedding weekend.

So despite the squeeze on incomes, middle-Britain has not stopped spending quite yet.

The promise of 'Next' day delivery before 9pm also has played its role with sales from its Directory up an astonishing 14.8%. This demonstrates the value of the online offering which Marc Bolland at Marks & Spencer is busy ramping up at the moment.

Looking ahead Wolfson, despite being cautious on the economy, still sees total sales rising by between 1% and 4% which allowed the brokers to lift full year profits forecasts to £570m.

The shares jumped 5% carrying M&S, Kingfisher and Wm Morrison up with them. So much for the naysayers.

Coming clean

It is hard to keep a good person down. The ubiquitous Sir David Walker (why is he not Lord Walker?) has been called back into action to try and end the stalemate over the long delayed publication of the forensic report into the events leading to the near collapse of the Royal Bank of Scotland.

Taxpayers deserves to know the content of the strategic errors which left them with an 84% stake in the troubled bank.

Walker will need all of his experience as a regulator and senior banker if he is to convince the legally savvy Sir Fred Goodwin to come clean on his misdeeds.