GLNCY Glencore Plc (PK)

By Matthew Curtin 

Glencore Chief Executive Ivan Glasenberg put his money where his mouth was in 2011, when he took the trading giant he inherited from Marc Rich public and held on to one of its biggest stakes.

On Monday, as part of a $10-billion plan to bolster Glencore's balance sheet, he promised he and his management team would also take a big chunk of any new capital it has to raise as part of that plan. The big question: Will that "skin-in-the game" mentality convince shareholders that Mr. Glasenberg can navigate the current commodities rout, and his toughest crisis at the helm of Glencore?

Management ownership at Glencore has been part of the allure for investors, who have largely credited Mr. Glasenberg with creating value for them by taking Glencore public, then gobbling up mining giant Xstrata, to build one of the world's biggest trading and mining firms.

So far, investors are embracing the move. Midday Monday in London, Glencore shares were up by about 7%. But they are still down some 56% from the start of the year.

"They're going into full battle mode, which the market certainly appreciates," said advisory firm Liberum Capital's Ben Davis. Management's participation in any new capital raising "says 'we love the price [of the stock] whatever the price is'," said SP Angel commodity analyst John Meyer.

Mr. Glasenberg remains Glencore's second-biggest shareholder, holding about 8.4%, behind Qatar's sovereign-wealth fund. His top team of managers, many of whom helped him take the company public, are also big shareholders, though not nearly on the same scale. Chief Financial Officer Steve Kalmin, for instance, holds around a 0.6% stake.

Investors had feared Glencore would seek to raise new capital, a move that could dilute them. On Monday, Glencore said it would suspend its dividend, raise about $2.5 billion in new capital and shed assets, among other moves.

Glencore said Mr. Glasenberg and top management would take part in over a fifth of the capital raising--or 22%. Glencore said Citigroup Inc. and Morgan Stanley would underwrite the remainder of the issue.

That means Mr. Glasenberg will be on the hook for as much as another couple of hundred million dollars in Glencore exposure. His current stake in Glencore is valued at about $2.1 billion, down sharply from the more than $9 billion it was worth after the company's initial public offering.

Messrs. Glasenberg and Kalmin signaled the moves that were announced Monday were conservative and pro-active, but were taken to reassure shareholders.

"After [talking to] shareholders, we decided to make the balance sheet bulletproof," Mr. Glasenberg told investors Monday. "It may be too much, " he said, saying if commodities prices recover, the company could restore its dividend, for instance.

Alex MacDonald and Scott Patterson contributed to this article.

Write to Matthew Curtin at matthew.curtin@wsj.com

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(END) Dow Jones Newswires

September 07, 2015 09:52 ET (13:52 GMT)

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