Investigation
A Giant Among Giants
Glencore -- founded by famous fugitive Marc Rich -- has cornered the
market on just about everything. Now that it's going public, will its
ties to dictators and spies stand up to scrutiny?
BY Ken Silverstein
APRIL 23, 2012
When Glencore, the world's biggest commodities brokerage firm, went
public in May 2011, the initial public offering (IPO) on the London and
Hong Kong stock exchanges made headlines for weeks in the Financial
Times and the trade-industry press, which devoted endless columns to the
company's astonishing valuation of nearly $60 billion -- higher than
Boeing or Ford Motor Co. The massive new wealth turned nearly 500
employees into overnight multimillionaires and made billionaires of at
least five senior executives, including CEO Ivan Glasenberg. "We are not
going to change the way we operate," vowed Glasenberg, who had started
as a lowly coal trader for the Swiss firm nearly three decades earlier
and, with the IPO, immediately became one of Europe's richest men.
"Being public will have absolutely no effect on the business."
And what a business it is. The firm was forced to pull back the curtain
on its famously secretive doings to go public, and what it revealed
shocked even seasoned commodities traders. Glencore, which Reuters once
called "the biggest company you never heard of," turned out to be far
more globally dominant than analysts had realized. According to its
1,637-page IPO prospectus, the company controlled more than half the
international tradable market in zinc and copper and about a third of
the world's seaborne coal; was one of the world's largest grain
exporters, with about 9 percent of the global market; and handled 3
percent of daily global oil consumption for customers ranging from
state-owned energy companies in Brazil and India to American
multinationals like ExxonMobil and Chevron. All of which, the prospectus
said, helped the firm post revenues of $186 billion in 2011 and employ
some 55,000 people in at least 40 countries, generating an average
return on equity of 38 percent, about three times higher than that of
the gold-standard investment bank Goldman Sachs in 2010. Since then, the
company has only gotten vaster in scale. It recently announced a $90
billion takeover of Xstrata, a global mining giant in which it already
holds a 34 percent stake; if the deal goes through, Glencore will rule
over an "empire stretching from the Sahara to South Africa," as the
Africa Confidential newsletter put it. As it is, Glencore already
trades, manufactures, refines, ships, or stores at least 90 commodities
in some three dozen countries. "Glencore is at the center of the raw
material world," said Peter Brandt, a longtime commodities trader.
"Within this world there are giants, and Glencore is becoming a giant
among giants."
What the IPO filing did not make clear was just how Glencore, founded
four decades ago by Marc Rich, a defiant friend of dictators and spies
who later became one of the world's richest fugitives, achieved this
kind of global dominance. The answer -- pieced together for this article
over a year of reporting that included numerous interviews with past and
current Glencore employees and a review of leaked corporate records,
dossiers prepared by private investigative firms, court documents, and
various international investigations -- is at once simpler and far more
complicated than it appears. Like all traders, Glencore makes its money
at the margins, but Glencore, even more so than its competitors, profits
by working in the globe's most marginal business regions and often,
investigators have found, at the margins of what is legal.
full: http://www.foreignpolicy.com/articles/2012/04/23/a_giant_among_giants
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