Climateer Investing: "Trafigura passes baton to next generation of billionaire traders"

Sunday, January 12, 2014

"Trafigura passes baton to next generation of billionaire traders"

From our December 2012 post "Major Commodity Trader Sees China Turnaround":

How do you know that Trafigura is a major?
1) It has its roots in the Marc Rich operation. (see Glencore)
2) About once a week a headline like this crosses the screen "Zambian minister under investigation over Trafigura contract"
3) Their $120 Billion in revenues is slightly ahead of Cargill and trails only Glencore/Xtrata ($220B) and the oil behemoth Vitol ($295B)....

From Reuters:

Commodity trading giant Trafigura is going through a once-in-a-generation ownership reshuffle, spending billions of dollars to buy out its earliest shareholders and allocating stock to a new generation of would-be billionaire traders.

A Reuters analysis of accounts for Swiss-based Trafigura shows it has spent around $2 billion on share buybacks over the past three years, and the unlisted company says it could spend another $1.5 billion until 2017 if profits allow.

The scale of the exercise, in a company where shareholders' equity only just tipped $5 billion at the end of September, indicates a major rebalancing of ownership and confirms executives have no wish to follow rival Glencore into a public listing of its stock, which would be an alternative route for founder shareholders to cash out.

"We undertake share buybacks for two reasons. First, to pay departing employee shareholders and, second, to rebalance shareholdings of current employees to avoid undesirable concentrations of ownership and to align shareholder return with contribution," a Trafigura spokesman said.

All but one of the original founders from 1993 have retired from executive positions. It is not clear how much each of the retired men used to control, but no shareholder holds more than 5 percent in Trafigura's 2013 accounts, except for Claude Dauphin, a founder who remains chairman and chief executive and owns "less than 20 percent".

"Dauphin is very much in control and remains a very strong revenue generator and deal maker," a senior executive at a rival trading house said.

The rest of the shares are held by 700 senior managers, past or present, which would include any of the other living founders - Eric de Turckheim, Graham Sharp, Daniel Posen and Mark Crandall - still owning shares.

GOLDMAN SACHS MODEL
Buybacks went up from $357 million in 2011, or roughly 10 percent of shareholders' equity at the time, to $787 million in 2012, or over 20 percent of equity. Last year, the buybacks amounted to as much as $855 million, or 17 percent of equity of about $5 billion.

Together with planned buybacks of $1.515 billion until 2017, Trafigura will have changed more than two thirds of its ownership over six or seven years, assuming shareholdings are redeemed at balance sheet value....MORE