An activist investor has called on commodities group Glencore to phase out its thermal coal business, divest outside the industry and improve corporate governance.
Bluebell Capital Partners, a London-based hedge fund that previously bought Danone and GlaxoSmithKline, wrote to miners and traders earlier this month, urging them to “chart a new future” without without coal, the world’s most polluting fossil fuel.
In the letter, seen by the Financial Times, Bluebell advises Glencore’s recently appointed chair Kalidas Madhavpeddi and CEO Gary Nagle that their company’s stock could rise 40-45% over the medium term if they followed the activist recommendations.
Despite a relatively low $200 million in assets under management, Bluebell has earned a reputation as a shrewd executive, spearheading the campaign that led to the ousting of Danone chief Emmanuel Faber in March.
In addition to being a major producer of battery metals such as copper, Glencore is the world’s largest exporter of thermal coal, which is burned in power plants to generate electricity. The unit is expected to make billions of dollars this year thanks to inflated prices.
However, Bluebell said Glencore’s plan is to cut its coal business and close all mines within the next 30 years – a strategy has been supported by its largest shareholders – is “morally unacceptable and financially flawed”.
“A clear separation of carbon assets and decarbonized assets is required to increase shareholder value,” the letter reads.
News of the activist intervention comes as Glencore prepares to host its annual investor conference on Thursday, at which Nagle is expected to lay out its strategic vision for the company.
The South Africa-born CEO, who took the helm at the end of June, has said he will consider strategic options for the coal business, such as a coal separator, if it becomes problem for large investors. He is also divesting assets outside the industry.
Bluebell, run by Marco Taricco and Giuseppe Bivona, has yet to disclose the size of its investment in Glencore and declined to comment when asked if it had discussed its proposals with Madhavpeddi and Nagle.
In a statement, Glencore said it “regularly” engages with its investors. “We are confident that our business model is unique to manufacturing, recycling and marketing the materials needed to decarbonize while reducing our own emissions and delivering value to our customers.” Stakeholders.”
While shares in Glencore are up 46 per cent to 358p this year – the best performance of their peers – they are still well below their 2011 floating price of 530p.
Bluebell also believes that Glencore’s operation is “unreasonably complex,” with more than 150 productive assets, “despite the fact that 90% of earnings before interest, taxes and recession are generated by just 14 assets.” “.
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While acknowledging Glencore’s recent sale of “tail assets in proportion,” Bluebell said the process needs to be accelerated and done in a more structured way.
At the same time, it wants Glencore to divest its nearly 50% stake in Canada-based agribusiness Viterra and the proceeds to return to shareholders. In that respect, Nagle said Glencore will work with its Canadian partners to create value.
Over the past three years, Glencore has cooperated with a number of regulatory investigations, including US Department of Justice Poll about possible corruption and money laundering in Nigeria, Venezuela and the Democratic Republic of the Congo.
Based on those investigations, Bluebell wants the company to “redesign” its “governance best practices” and wants all Glencore board committees to include a majority of independent directors. including the president.
“We recognize that a company in your industry will always be involved in controversies, however, the sheer numbers are clear evidence that the current governance framework is not providing oversight and proper management of the company’s operations,” the letter read.