Glencore on Monday announced a $960m deal to buy Israeli billionaire Dan Gertler out of two of the mining-cum-trading company’s copper and cobalt operations in the Democratic Republic of Congo.
The deal is another sign that Ivan Glasenberg, Glencore chief executive, is back on the acquisition trail after two years spent strengthening the company’s balance sheet during the commodity slump.
Glencore will buy Mr Gertler’s 31 per cent stake in Mutanda Mining and his 10 per cent shareholding in Katanga Mining, both of which are held through his Fleurette group. Mr Gertler’s stake in Mutanda is valued at $922m, while his shareholding in Katanga is worth $38m, according to a statement by Fleurette.
Glencore is set to pay $534m to Fleurette in cash for the equity, after deducting debts owed by Mr Gertler’s group and its affiliates to the Swiss company. After the deal, Glencore will have a 100 per cent interest in Mutanda, and 86 per cent of Katanga. Mr Gertler said on Monday that his investments in the Mutanda and Katanga mines had “generated $3bn in tax revenues since our investment — a significant contribution to the DRC economy”.
“With [Mutanda] now operating at full capacity, we feel now is the right time to exit our investment and to reinvest in further brown and greenfield opportunities,” he added. Analysts said that Glencore’s move to buy out Mr Gertler from the two DRC mines would lead to only a marginal increase in its net debt, which would remain below 2 times earnings — the company’s self imposed target.
Glencore has invested heavily to transform Mutanda into a large copper producing mine. It has been hailed by analysts as one of the Glencore’s most attractive copper assets even though it is in the DRC, where there have been anti-government demonstrations in recent months. Analysts and fund managers said they were not surprised that Glencore was severing ties with Mr Gertler in the DRC, given impending political change.
President Joseph Kabila, who has close ties with Mr Gertler, said last year that he would step down in 2017. “Glencore doesn’t want to be too closely associated with the old regime, so is moving to distance itself,” said one fund manager. Many of the world’s biggest mining companies are keen to increase their exposure to copper because supply shortages are expected to emerge before the end of the decade. The metal hit a two-year high above $6,200 this month.