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Ivan Glasenberg's Play For Xstrata Forces Him From His Cone of Secrecy

Forbes Asia
This article is more than 7 years old.

This story appears in the February 2013 issue of Forbes Asia. Subscribe to Forbes Asia


Commodities trading has already made Ivan Glasenberg one of the richest people in the world. Now he was trying to pull off one of the world's biggest corporate deals, one that would make him even richer. As chief executive of Switzerland's Glencore International he had usually managed to keep his head down and stay out of the news. But last year, as Glencore waged its $33 billion takeover battle for miner Xstrata, he was learning that he could no longer live the secretive life, with just a few public appearances and a home high on a hill near the Swiss village of Rüschlikon, a 15-minute drive from Zurich.

So Glasenberg, pushed by his advisors, briefly emerged from his corporate cocoon to speak publicly and sit for a handful of media interviews. He was not happy about it. After all, he had learned the business from mysterious oil trader Marc Rich.

The most open event hosting Glasenberg was a meeting of the Melbourne Mining Club held, oddly enough, in London. Conducted under a marquee at Lord's Cricket Ground, the 600 people on hand heard the guest speaker talk forcefully about his business and private lives. It was perhaps fitting that he opened up to an Australian organization because, after growing up and starting his career in Johannesburg, he gained Australian citizenship during a two-year coal-trading assignment for Glencore in Sydney in the late 1980s.

A few days after the talk he granted FORBES ASIA a face-to-face interview in his London office. But by then he had lapsed back into his cone of secrecy, insisting that the conversation be off the record--a demand that proved to be nonsensical because he largely repeated what he had said at Lord's.

The 56-year-old Glasenberg is short, with a receding hairline and a tough demeanor. But after the first impression his gritty personality soon takes over, with his slightly high-pitched voice and sharp South African accent that cuts through background chatter. The way he dominates a room is a clue to his master plan that goes far beyond simple buying and selling of coal, copper, cotton and wheat. In his sights is a status unrivaled in the raw materials sector since Cecil Rhodes held sway over much of southern Africa in the 19th century through the diamond trading company he founded, De Beers. Glasenberg might not be Rhodes, but there has not been an individual who figures to have such a powerful grip on a big mining house since Rhodes, nor has there been one willing to think and act so differently from his rival chief executives.

When he closes the Xstrata deal, which is expected by Mar. 15, the combined group will have a notional value of $92 billion, making his 8.27% stake worth $7.6 billion. (But until the last hurdles are cleared and the deal is complete, FORBES ASIA is keeping his net worth at $6.7 billion, down 7% since last year but maintaining his second-place rank on our list of Australia's richest.) With coal, copper, zinc and nickel operations in Australia and 40 other countries around the world, Glencore will rival the world's two biggest miners, BHP Billiton and Rio Tinto.

What's different about Glencore is the personal control the CEO exerts over the company. None of Glasenberg's rival CEOs in the mining and commodity-trading world has such a big personal stake in the companies they run. And he promises that he will never sell a Glencore share as long as he works there. This philosophy of having skin in the game extends deep into Glencore's ranks. He said at Lord's that he wants staff with the same entrepreneurial spirit that made him rich. "A lot of deals are done or not done because chief executives are not fully aligned to shareholders," he said. "We want people who work for us to be entrepreneurs. We like them to look at ideas. We like them to chase ideas. We like them to not be what I call a caretaker of an asset."

Glasenberg charts a distinctly different path from his mining brethren on many other fronts. He prefers buying, not building, mines and other assets, a leaning shaped by Glencore's 1998 investment in the deeply troubled Murrin Murrin nickel refinery in Australia. "Why should I build an asset when I can buy it more cheaply than you can build it?" he said. "We did build one asset in Australia, a refinery with a theoretical capacity of 40,000 tons of nickel a year. We're still struggling to get 30,000 tons."

He breaks with another mining tradition with Glencore's mixing of "hard" commodities such as minerals with "soft" commodities such as food and textiles. None of Glasenberg's pure mining counterparts has shown an interest in diversifying into the soft commodity world of wheat, corn, soy and cotton that he finds as comfortable as trading in coal and copper. Surely, though, they've been watching his "all-commodities" model.

Glasenberg also invests in countries that are sometimes viewed as too risky by his rivals, including Colombia at the height of its terrorist troubles in the 1990s and the Democratic Republic of Congo (the old Zaire) in the early 2000s despite regular outbreaks of civil war. And while big players focus only on big investments that will move the needle for profits and revenue, he's not interested in the size of an investment as long as it's profitable.

Perhaps most important, he rejects the notion of holding "first tier assets only" (first tier assets are among the biggest and lowest-cost in the world) that dominates investment decisions by BHP Billiton and Rio Tinto. "I don't care what kind of assets we have," said Glasenberg. "What are we focused on? Return on equity. We don't need these great big tier one assets. I'm very happy with getting tier two, tier three assets; that's what Glencore has been good at. Putting them together and creating tier two assets that we bought cheaply from other people, putting them together to create a great asset, which gives us a great return on equity."

If his "second tier" theory of raw materials investing delivers the returns he expects with a now much bigger company, then Glasenberg's way will lead to a permanent change in how other mining companies operate.

The heart of Glasenberg's approach, value for money, can easily be traced to his roots as the son of a Lithuanian luggagemaker who migrated to South Africa, "mortgaging his home to put [money] into his business," he said at Lord's. A fitness maven, Ivan tried to represent South Africa (or his religious homeland of Israel) as a speed walker in the 1984 Olympics but was foiled by an apartheid-era ban on participation by South Africans that wasn't lifted until 1992. He trained as an accountant in South Africa, became interested in trading while earning an M.B.A. at the University of Southern California and got his start in commodities with Rich, founder of the company that became Glencore.

Investors have been slow to fully embrace the Glencore-Xstrata deal, uncertain about the price paid and changes to the original "merger of equals" proposals. Xstrata's second-biggest shareholder, Qatar investment arm Qatar Holdings, forced Glencore to raise its price. Unhappy with being seen as blinking first in the standoff, Glasenberg proceeded to extract his price by turning the deal into a full-blown takeover. That ended an arrangement that had his long-term associate and Xstrata managing director, Mick Davis, becoming CEO of the merged outfit. Davis and other Xstrata executives are leaving early, and Glasenberg will be the undisputed boss.

Davis' premature departure worries investors as much as the uncertainty about the radical all-commodities business model, the preference for second-hand and second tier assets at such a big company, and the fact that Glasenberg is proving to be as much a business revolutionary as entrepreneur. And the market notes that much of what he's achieved over the past decade came during one of the great commodity-price booms. Whether his style and strategy can tolerate a downturn in commodity prices will be a big test. Glencore profits did drop 26% in the first six months of last year, the first significant decrease since prices fell.


Ivan Glasenberg's immense wealth came to light in 2011 when he listed his Glencore International on the London Stock Exchange. Giving up his anonymity wasn't the only change he endured. In his talk at Lord's last year, he discussed having to now appoint outside directors to Glencore's board, describing the selection process, facetiously, as "one of the joys of going public."

"We did the normal thing and looked at a list of potential board members, and I said, 'Who are these guys? I've never met them.' So the first thing you get to know about a board of a public company is that you're not supposed to meet them because then they're not independent.

"I looked at the names and said, 'I need guys who can help me run this company, that's what boards are for; they've got to understand your business.' I ranted. I said this isn't going to work. Let me find people I know."

In the end Glasenberg got the seven fellow directors he wanted, though he's had to endure controversy dogging some of them. One of the five independent nonexecutive directors is Tony Hayward, who had been CEO of oil company BP at the time of the Deepwater Horizon oil spill in the Gulf of Mexico. --T.T .