Activist hedge fund Bluebell Capital Partners asked Glencore Plc to separate its thermal coal business because it has become a barrier to investment.
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The commodities giant could achieve more value for shareholders if it separates its business, disposes of non-core asset Viterra, and tackles governance issues, according to the hedge fund firm. Bluebell's partners Giuseppe Bivona and Marco Taricco made demands in a letter to the company, a copy of which was seen by Bloomberg.
Bivona didn't want to comment beyond the letter. Glencore is engaged with investors in a statement, the company said.
Glencore said that our business model is uniquely placed to produce, recycle, and market the materials needed to decarbonise energy while reducing our own emissions and deliver value for stakeholders.
Bluebell, a London-based company that has shaken boardrooms across Europe and launched activist campaigns against companies from GlaxoSmithKline Plc to Danone SA, said Glencore's coal activities hurt its valuation both from an ESG perspective and the uncertainty surrounding terminal value. The company s plan to keep thermal coal as part of its portfolio until 2050 is morally unacceptable and financially flawed, according to the pair. Due to its coal business, Glencore is not an investible company for investors who place sustainability at the heart of their investment process, Bluebell s partners wrote in a letter dated November 8. A clear separation between carbonised assets and decarbonised assets is needed to increase shareholder value and remove coal discount while ensuring that coal assets are managed responsibly. Glencore is the world's biggest thermal-coal shipper and its billionaire former boss Ivan Glasenberg has been a firm advocate for the business. While some of the company's biggest rivals have already exited the dirtiest fuel, Glencore received investor backing for plans to keep running its mines until they close by the year 2050. Glasenberg stepped down as the chief executive officer this year, but he remains Glencore's second-biggest shareholder.
Coal is still a major earner for Glencore, and the company is expected to produce bumper full-year earnings after prices hit record levels during the recent energy crunch in China. Glencore expects to deliver windfall dividends from the coal surge.
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The company's shares have rallied this year to beat other big miners. Glencore has gained more than 50% in London, compared with 4.9% for BHP Group and a decline in Rio Tinto Group.
In recent years, the company has said it will be prepared to sell or spin off its coal business if enough shareholders demand it exit. In April, shareholders approved its climate transition plan by 94%.
Bivona co-founded Bluebell with fellow finance industry veteran Taricco and Francesco Trapani, who ran Italian jeweler Bulgari SpA for nearly three decades. The three spent years helping Elliott, Jana Partners and other activists execute campaigns in Europe and the U.S. Their Bluebell Active Equity Fund was up about 17% through October this year, according to an investor update.
According to the letter, Bluebell has a stake in Glencore, but has not disclosed its size.
The letter to Glencore is the latest move of activist investors who want to influence how the world's natural resources giants confront the green-energy transition. In the past year, both Exxon Mobil Corp. and Royal Dutch Shell Plc have faced a lot of pressure from activists.
Bluebell's action comes at a time of transition for Glencore. A new chairman and a new chief executive have been appointed by Gary Nagle, a long-time company insider who replaced Glasenberg at the end of June.
Glencore's ownership may pose challenges, as Bluebell has had a lot of success in the past. Glasenberg, who ran the company for two decades and is a former coal trader, owns 9.2% and several other ex-managers also have large holdings, like Nagle.
Bluebell wants the company to transform its agricultural business into a pure player in green-economy transition metals and to streamline the existing production asset base. Bluebell also called for the company to improve its corporate governance. Glencore has been involved in legal investigations, including an ongoing investigation by the U.S. Department of Justice.
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