A activist investor called on Glencore’s London listing to be moved to Sydney, and to abandon plans to spin-off its profitable coal division.
Tribeca Investment Partners is an Australian hedge-fund that wrote to Glencore this week to offer a number of suggestions to increase the share price. According to the letter, the Australian fund said the share price had fallen behind its rivals ever since the Swiss commodities giant went public in 2011.
The hedge funds suggested that Glencore increase dividends, by abandoning the share buybacks. They also recommended selling a small minority stake of its profitable trading division through an IPO.
Ben Cleary wrote in a letter that Glencore’s stock price had underperformed other companies. The company will be able to increase shareholder returns and close the gap in valuation by taking these actions.
Tribeca reported that Glencore has provided shareholders with returns of 9% since its listing in 2011. This compares to 95% for BHP, and 126% for Rio Tinto.
After BHP’s primary listing in Australia, 2022, the activist’s campaign adds pressure to London, as mining companies seek higher valuations on other exchanges like New York, Sydney, and Toronto.
Cleary wrote that “London is not the home of mining” and added that investors would better recognize Glencore’s efforts under Gary Nagle, chief executive of its mines to reduce carbon emissions.
He added that the LSE had a low appetite for investment in mining and was no longer suitable to be the primary bourse of a company.
According to a source familiar with the situation, Tribeca controls about $300mn in Glencore via shares and derivatives. The hedge fund has successfully waged activist campaigns against other mining companies, asking BHP and Teck Resources for the sale of US shale assets.
The Swiss group’s request that it retain its coal division, which will be boosted after a $6.9bn purchase of Teck’s steelmaking coal unit is completed later this year casts doubt on the largest shake-up since 2013, when the company merged with Xstrata.
The group announced in April that it intended to split up its commodities empire, by spinning off its coal division. It planned to do this within two years of the completion Teck’s deal, depending on shareholder feedback.
Glencore refused to comment on the letter. Nagle stated at the company’s full-year results in December that spinning out coal “is our intent but is always subject to our shareholders’ wishes”.
The company has been insisting for years that it is better to sell coal mines to publicly listed companies than to private firms that are not subject to scrutiny, in order to run them down responsibly as the world decarbonises.
The company’s rationale for proposing the coal spin-off was to achieve a higher value for its portfolios of copper, nickel, and zinc mines, as they have argued that the value of these mines is reduced when bundled with fossil fuel mines.
Analysts question, however, the impact of the thermal coal divestments by industry peers Anglo American, and Rio Tinto. They argue that the moves did not lift their shares.