Former Xstrata founder Mick Davis may have a wry smile at the sight of Glencore being forced to raise $US2.5 billion in new equity to reduce its debt.
Davis has a remarkable record for being part of groups that buy assets cheaply and sell them at high points in the market.
Glencore is in trouble partly because in 2013 it paid some $US40bn for the two thirds of Xstrata it didn’t own. Mick Davis had sold at the top of the market. It is true Xstrata shareholders received Glencore shares but they had time to sell them before the market declined sharply.
That sale was Davis’s second coup. Back in 1997 he became chief financial officer and an executive director of Billiton, which sold out to BHP four years later in 2001. BHP never made a success of most of those Billiton assets and a large number were floated off in South32 earlier this year.
After BHP took control of Billiton, Davis made his exit and established Xstrata in the belief that around Australia there were a large number of mining assets that were underpriced because there was a looming boom coming on the back of a big rise in demand for minerals from China. In setting up Xstrata, Davis partnered with Glencore, then headed by the colourful minerals trader Willy Strothotte.
The original Glencore commodity trading business was founded by Marc Rich, who started Marc Rich & Co in 1974. Marc Rich was a brilliant albeit controversial trader. He was charged by US authorities with selling oil to Iran during the 1979-81 hostage crisis.
Rich fled to Zug, Switzerland, insisting that he had done nothing illegal. He was pardoned by Bill Clinton on the president’s last day in the White House. Soon after, Rich handed control to Willy Strothotte, who had been with Rich at Glencore since 1978.
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