Murray Takes Glencore From Rich Legacy With Foreign Legion Vigor
Simon Murray, Chairman of Glencore International PLC. photographed at his Hong Kong office, June 22, 2011. Photo by Palani Mohan/Bloomberg Markets via Bloomberg.
During five years in the French Foreign Legion, Glencore International Plc Chairman Simon Murray was sent on missions ranging from death defying to merely gruesome.
Dispatched to rescue trapped comrades encircled by Algerian independence fighters in the Aures Mountains in 1961, Murray survived an ambush in which the Legionnaire beside him died in a hail of machine gun bullets, Bloomberg Markets magazine reports in its October issue.
After another battle, Murray was ordered to stuff the severed heads of two enemy soldiers into his pack and carry them back to base for identification, blood dripping down his back.
When he quit the Legion in 1965 with the rank of senior corporal, U.K.-born, Hong Kong-based Murray didn’t leave his combativeness behind. He has headed Deutsche Bank AG in Asia and been taipan -- Cantonese for “big boss” -- of billionaire Li Ka-shing’s business empire.
At age 63, he became the oldest man to reach the South Pole unaided, on a 58-day slog during which he lost 50 pounds (23 kilograms).
“Simon is one of the most extraordinary characters I have met,” says Chris Patten, chairman of the BBC Trust and the last colonial governor of Hong Kong before the British ceded it to the Chinese in 1997. “He is brave, outspoken, funny and pushes himself to almost crazy lengths.”
At 71, Murray is facing new challenges. As the recently appointed chairman of Glencore, Murray in May helped to steer the world’s biggest commodities-trading company through a $10 billion initial public offering in London and Hong Kong, the largest IPO to date in 2011.
And as a director of Sino-Forest Corp., a Chinese tree-plantation company listed on the Toronto Stock Exchange, Murray watched the company’s share price plunge 67 percent between June 2 and Aug 26, when the Ontario Securities Commission suspended the stock from trading, saying the company may have misstated revenue.
The suspension followed similar claims by short seller Carson Block’s Muddy Waters LLC research firm in a June 2 report that Sino-Forest was overstating its assets. Investors, including hedge fund firm Paulson & Co., have lost C$3.3 billion ($3.4 billion).
Sino-Forest has denied the allegations and has commissioned an independent investigation. Founder and chief executive officer Allen Chan resigned on Aug. 28 and the company said three other employees had taken leave.
Chan and other insiders, including Murray, sold C$81 million of shares since the end of 2006, according to regulatory filings in Toronto. Murray’s sales totaled C$10.8 million, the filings show.
In a telephone interview, Murray yesterday denied any suggestion that he had been cashing out of Sino-Forest, saying he had swapped the holding for a stake in a Sino-Forest subsidiary, Hong Kong-listed Greenheart Group Ltd., of which he is also a director.
Murray personally owns 1,246,000 Greenheart shares and a private equity firm he heads, General Enterprise Management Services Ltd (GEMS), owns 7 million shares, according to data compiled by Bloomberg. Those shares were worth a total of 7,499,140 Hong Kong dollars ($963,000) when they were suspended from trading on Aug 29. The stock has fallen 68 percent since June 2.
“I sold some of my shares in Sino-Forest to buy shares in Greenheart,” Murray said from Cameroon, where he was on a business trip.
Murray said he couldn’t comment further on the Sino-Forest allegations pending the report of the independent inquiry, which is due by the end of the year. However, he said he had no intention of quitting either as Glencore chairman or as a Sino-Forest director. “I am not planning to resign,” he said.
In an earlier interview in June, Murray had briefly touched on his role at Sino-Forest. “I am on the side of investors,” he said then. “I have to make bloody sure we haven’t made any mistakes.”
Murray’s involvement with Sino-Forest has intensified the scrutiny he already faces in his role as chairman of Baar, Switzerland-based Glencore, a job for which he will earn 675,000 pounds ($1.1 million) a year.
The IPO immediately propelled Glencore, with a market value of $59 billion, into the FTSE 100 Index, which tracks the U.K.’s biggest companies, although the stock had fallen 20 percent from its initial price as of yesterday.
Glencore was founded in 1974 by former fugitive investor Marc Rich. Rich was indicted in 1983 for tax evasion and for buying oil from Iran in violation of U.S. sanctions before being pardoned in 2001 by President Bill Clinton. In 1994, Rich sold the company, then known as Marc Rich & Co., to its managers, who changed the name to Glencore and ran it as a closely held partnership.
Those managers still own 83.6 percent of the company and have built it into such a dominant force that, according to the company’s website, it’s involved in shipping more than half of the world’s seaborne zinc, one-fourth of the copper and coal and 3 percent of all oil that’s traded by third parties. The company also owns 34 percent of Xstrata Plc, the world’s fifth-biggest mining company.
In 2010, Glencore profit surged 39 percent to $3.8 billion on revenues of $145 billion as commodities prices soared 80 percent in the two years to March 2011. Profit in the first half of 2011 jumped 54 percent to $2.45 billion, the company reported on Aug. 25.
Level of Transparency
As a result of the IPO, five of Glencore’s 500 managers have become billionaires, led by Chief Executive Officer Ivan Glasenberg, 54, whose 15.7 percent stake is worth about $7.2 billion, according to data compiled by Bloomberg.
Murray’s job as chairman is to convince investors such as James Bevan that Glencore can achieve the transparency they expect of the world’s biggest public companies. Bevan, who oversees about 6 billion pounds as chief investment officer of London-based CCLA Investment Management Ltd., says he didn’t buy the stock in the IPO partly because Glencore doesn’t match the level of disclosure of BHP Billiton Ltd. or Rio Tinto Group and because the managers had chosen to sell shares when commodities prices were close to their peak and likely to fall.
“There’s no alignment between the interests of the controlling owners and the public shareholders,” Bevan says.
‘It Was Clumsy’
Bevan said before Sino-Forest’s suspension from trading that Murray’s presence as chairman may help him change his mind about Glencore.
“It gives me much greater confidence,” Bevan said then. “It would have been very easy to find a figurehead from politics who could be spoon-fed information and not ask inquiring questions. He’s very competent and he won’t be pushed around.”
Following the past week’s developments at Sino-Forest, Bevan says he’s not so sure. “We continue not to hold Glencore shares and certainly won’t consider purchases until this is now fully resolved, and Simon Murray’s position is clear and confirmed to be fine,” Bevan said in an email yesterday. “If it isn’t, his position as Chairman is untenable.”
Murray said yesterday he had come under no pressure from inside or outside Glencore to stand down.
Murray’s appointment to the Glencore chairmanship didn’t proceed smoothly. In April, British media reported the job would go to former BP Plc CEO John Browne. By the time Glencore announced its IPO plans on April 14, it still hadn’t disclosed who the chairman would be. A statement naming Murray followed hours later. “It was clumsy,” Bevan says.
That wasn’t the only mishap. In May, Murray was attacked by U.K. Business Secretary Vince Cable for comments Murray had made in an interview with a British newspaper about the risks associated with hiring women who might get pregnant. “I think his comments show an extremely primitive attitude,” Cable said. Murray, who apologized, says his comments were taken out of context.
Then came the Muddy Waters claims about Sino-Forest, on whose board Murray has served since 1999. Murray said in the interview in June he had personally taken a paper loss of $3 million to $4 million on shares he owns in Sino-Forest and Greenheart.
A bigger loss, should the allegations be proved, would be to his credibility as an independent director. “When you’re a company director, your reputation is always on the line,” says David Webb, a shareholder activist and former director of the Hong Kong stock exchange whose Webb-site.com exposes corporate shenanigans.
As well as chairing Glencore, Murray is a director of eight public companies, including Geneva-based luxury goods maker Cie. Financiere Richemont SA, owner of the Cartier brand, and Li’s Cheung Kong Holdings Ltd., Hong Kong’s second-biggest property developer. Murray also runs his own $800 million private-equity firm, GEMS, which boasts former U.S. Secretary of State Henry Kissinger as an adviser.
Murray will continue to be based in Hong Kong but will keep an office and secretary in Baar. He says he’ll attend 20 Glencore board and other meetings each year and will spend time each day on e-mails and regular contact with Glasenberg.
Murray--who’s 5 feet 8 inches (1.7 meters) tall and wiry-- still treks in the Himalayas and jogs up to 3 miles (5 kilometers) a day and says he can handle the pressure. “It doesn’t get me in the gut,” he said in the interview in June in his office at GEMS’s headquarters 36 floors above Hong Kong’s Victoria Harbor.
‘Things Get Twisted’
On his desk, a model Legionnaire stood at attention near a copy of the latest reprint of his memoir, “Legionnaire” (Ballantine Books, 2006). He said he was fairly stoical about criticism. “But I get irritated when things get twisted,” he said.
After spending five years in the Legion, Murray can survive anything thrown at him, says a friend, British novelist Frederick Forsyth.
“They made it extraordinarily hard for young Brits,” says Forsyth, 73, who as a Paris-based journalist covered the Algerian War of Independence and whose 1971 novel, The Day of the Jackal, was based on its aftermath. “It was sadistic stuff. I have met Legion generals who have enormous respect for Simon.”
Nor has age wearied Murray, Forsyth says. “We go shooting pheasant, and Simon has such amazing energy that you get breathless watching him,” he says.
Murray says he plans to use that energy to work with Glasenberg to improve Glencore’s image. “I think the word secretive is misapplied here,” he says. “When you are a private company, you get on with your business. This isn’t whispering-out-of-the-corner-of-the-mouth stuff.”
Murray says he and Glasenberg both know their roles. “Ivan’s is to run the business, and mine is to run the board-- and the board functions in great part to look after the interest of shareholders,” Murray says. “That’s all about good governance. Ivan’s the sort of guy who will listen. He has not run a public company and is very conscious of the fact.”
There are eight directors on the Glencore board, including former BP CEO Tony Hayward, now head of investment company Vallares Plc and Leonhard Fischer, CEO of RHJ International SA, the Brussels-based investment firm that last year acquired U.K. private bank Kleinwort Benson. Glasenberg declined to comment for this article.
‘We’re Building Hospitals’
Another issue Murray says he wants to tackle is public relations. Glencore owns mines in developing countries, and advocacy groups such as Global Witness have alleged it pollutes, offers low wages and doesn’t pay enough in taxes.
In May, the European Investment Bank, the European Union’s lending arm, announced it had barred Glencore from receiving loans because of corporate governance concerns and a tax dispute in Zambia. Glencore spokesman Simon Buerk said the company, which denies any wrongdoing, welcomes an inquiry.
“You have pension funds that zero in on this stuff,” Murray says. “People talk about Glencore taking out, but we’re also putting back. We’re building hospitals and schools.”
While Murray’s background is far removed from those of Glencore’s employees in developing countries, he didn’t entirely escape hardship. After his father left home, Murray spent time in a British orphanage. Although later schooled privately, he dropped out of the educational system at age 18.
When he was 20, he took a train to Paris and enlisted in the Legion, the 180-year-old force of mostly foreign mercenaries that fought in France’s colonial wars and carries on today as an elite military unit.
‘Laundromat of Thugs’
Murray was immediately posted to Algeria, fighting guerrillas of the National Liberation Front. In his book, Murray tells of conditions so tough that some recruits deserted. Murray stayed but declined the offer of officer school.
Instead, he headed to Asia. “Simon came out of a laundromat of thugs,” says Ken Courtis, former Asia vice chairman of Goldman Sachs Group Inc. “Through extraordinary ambition, energy and drive, he made the world his school.” In 1966, Murray joined Hong Kong-based British conglomerate Jardine Matheson Holdings Ltd. as a trainee and eventually rose to senior management.
In 1980, he set up his own company, Davenham Investments. Then, in 1984, he teamed up with Li, who had risen from poverty to acquire Hutchison Whampoa Ltd., making him the first Chinese to own one of Hong Kong’s great trading houses. Li wanted Murray to run it.
Murray was doubly unique among Hong Kong business leaders: He believed in transparency and was prepared to speak his mind, says Stephen Vines, author of “Hong Kong: China’s New Colony” (Aurum Press, 1998).
“There were only three ways to rise to the top in the Li Ka-shing empire,” Vines says. “You were either family or a sycophant or you were Simon Murray.”
Murray’s independence wasn’t confined to business. In 1992, London dispatched its last colonial governor, former cabinet minister Chris Patten, to manage the handover of Hong Kong to China five years later.
Patten began to introduce a limited form of democracy. Chinese government spokesmen objected loudly. Most business leaders, including Li, sided with Beijing. Murray, equally loudly, backed Patten and quit as Li’s taipan. In 1994, he joined Deutsche Bank and, four years later, launched GEMS.
‘March or Die’
In his book “East and West” (Pan Macmillan, 1998), Patten says the Chinese Communist Party must have had a fat file on Murray. In reality, rather than blacklisting him after the handover, leaders of some of China’s biggest companies embraced him, appointing him to the advisory boards of offshore oil giant Cnooc Ltd. and Huawei Technologies Co., China’s largest phone equipment maker.
When he’s been able to break away from the corporate suite, Murray has continued his adventuring. In 2000, three years before his trek to the pole, Murray completed the Marathon des Sables, a six-day, 243-kilometer foot race across the Sahara.
“A slogan of the French Legion is ‘March or Die,’ and that’s one of the enduring features of Simon’s life, both in business and his other adventures,” says Daniel Mudd, a former U.S. Marine Corps officer who now oversees $43 billion as CEO of New York-based Fortress Investment Group LLC.
Judging by Murray’s past record, it won’t be easy to knock him off his stride.