| LAUSANNE, Switzerland, April 16
LAUSANNE, Switzerland, April 16 Privately held
commodity merchants will face mounting pressure to list shares
as they compete for capital to fuel their expansion beyond
trading, senior executives said on Tuesday.
Glencore raised more than $10 billion via an initial public
offering in 2011, although major rivals such as Vitol and
Mercuria have so far not followed suit.
But that could change as competition heats up among top
players to buy assets and increase control of supply chains in
the face of slim profit margins.
"I'm not sure that in the next phase, the next five years,
we can necessarily stay private. It depends on the access to
capital," Serge Schoen, chief executive officer of private
trading house Louis Dreyfus said at the FT Global Commodities
Bunge's chairman and chief executive Alberto Weisser said
the quickening pace of consolidation would heap further pressure
on private firms to list.
"I believe that we will see some more companies going public
because we have seen that it is necessary to be very large and
probably even larger. There needs to probably be even more
consolidation," Weisser told the conference.
Yusuf Alireza, CEO of Noble Group, said the need to access
new forms of capital would only increase in coming years due to
For example, the so-called "Basel III" regulations - to be
phased in from next year - require higher levels of capital and
reserves at banks, which will make commodities lending more
"The clear implication of Basel III is that the cost of
funding from banks is going higher so the advantage of being
able to access capital markets for funding is going to
increase," he said.
A public share offering gives access to long-term,
inexpensive capital, although it also means more scrutiny for
trading companies working in a sector that has traditionally
sought to conceal strategies in a competitive environment.
But concerns about transparency may act as less of a
deterrent in future.
Trafigura and Louis Dreyfus are already facing greater
disclosure requirements due to bond listings. Gunvor said on
Tuesday it was planning to follow suit with a 5-7 year $300
"The transparency of the private firms will have to
increase," said Cargill chief executive Greg Page.
Even if trading firms do not opt for a full initial public
offering (IPO), they may list a portion of their business,
according to executives.
"What we might see and we have seen is some of the assets
spun off into the public domain," said Mercuria chief executive
Mercuria is seeking to sell up to a 20 percent stake to a
strategic investor, but Dunand reiterated on Tuesday that there
were no plans for an IPO.
Vitol's CEO Ian Taylor said: "It's horses for courses. If
you want to go into heavily capital-type assets you're going to
go more public inevitably."