In a bold move that underscores the power of activist investing, Glencore International AG is under pressure from a prominent hedge fund to retain its coal unit and relocate its main listing from London to Sydney. Tribeca Investment Partners, an Australian hedge fund that controls approximately $300 million of Glencore’s assets through shares and derivatives, has made this strategic demand, signaling a significant shift in the conglomerate’s potential future.
The advocacy for Glencore to maintain its coal division and to transfer its primary stock exchange listing to Sydney comes amid a series of successful activist campaigns orchestrated by Tribeca against various mining groups. These campaigns have included a push for BHP Group to offload its US shale assets and for Teck Resources Ltd to divide its metals division and energy operations, which include coal and oil sands segments.
At a recent Glencore earnings dinner, the topic of a New York listing was broached, hinting at the global nature of the discussions around the company’s strategic moves. However, Glencore’s senior figures, including Gary Nalge, the company’s CEO, have stressed the need for decisions to reflect long-term value rather than being reactive to short-term market trends. These decisions, Nagle insists, must gain the backing of the majority of shareholders, aligning with the corporate governance model that prioritizes shareholder consensus.
In related financial forecasts, Deutsche Bank analyst Liam Fitzpatrick noted in a research memo that Glencore has the potential to significantly reward its shareholders in the second half of the year if plans to separate its coal unit are postponed. Following a 14% decline in share value since the beginning of the year, and with market expectations being recalibrated downward, there is heightened anticipation for the forthcoming completion of the Elk Valley Resources project and the consequential decision regarding the coal unit’s fate.
Fitzpatrick believes that the possibility of the planned demerger being delayed is increasing. If this is the case, Glencore could re-emerge as a top cash-producing entity within the sector. An impressive $2 billion to $3 billion in additional cash returns to shareholders could be on the table in the latter half of the year. Riding on this optimism, Deutsche Bank has upgraded its rating on Glencore shares from ‘hold’ to ‘buy’. This optimistic outlook is mirrored in the company’s recent share price uptick of 1.8%, closing at 407.00.
The unfolding scenario presents a complex tableau for Glencore, balancing between shareholder activism’s push for a major strategic shift and financial analysts’ projections of lucrative returns should the company opt to delay its coal unit demerger. The global mining titan now stands at a strategic crossroads, with its decisions in the coming months likely to have a far-reaching impact on its financial health and market positioning.
Source: TheCoalTrader
