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February 4, 2013 9:34 pm
Mercuria, one of the world’s top oil traders, has hired bankers for a partial sale, becoming the first of the Swiss-based houses that dominate global raw materials trade to follow Glencore in opening up to outside investors.
The company has for the past two years touted a partial sale but the appointment of Credit Suisse, which has already canvassed potential investors among private equity houses and sovereign wealth funds, points to a deal this year.
However, Mercuria does not plan to follow Glencore with a public listing, according to people familiar with the company’s plans. The trading house wants to remain privately owned for now.
Instead, it is more likely to welcome between two and four institutional investors.
The company could achieve a valuation of between $3bn and $6.5bn, according to prospective investors. Mercuria has in the past made net profits of between $300m and $450m, according to files in the registry of Larnaca, Cyprus, where the company is incorporated, suggesting a price-earnings multiple of 10-15 times.
The sale would crystallise huge paper gains for the founders of the company and its senior staff.
Mercuria was founded nine years ago by two former Goldman Sachs oil traders, Marco Dunand and Daniel Jaeggi, and two Polish investors, Gregory Jankilevitsch and Wiaczeslaw Smolokowski.
The company ranks fifth after Vitol, Glencore, Trafigura and Gunvor among the independent oil traders. But it has expanded in recent years into power, natural gas and more recently into coal and base metals.
The potential partial sale is the latest sign of change among the publicity-shy Swiss-based commodities industry. The trading houses traditionally had been owned by families or their employees.
Glencore, the world’s largest trader, became the first trader to open to outside investors in 2009 with a convertible bond, followed in 2011 by a flotation in London and Hong Kong.
The ownership changes in the Swiss commodities industry are partly driven by a change in the business model of the trading houses. These have moved away from their traditional role as middleman – selling and buying commodities in a business of large volumes but razor-thin margins – to increasingly become vertically integrated groups, with interest spanning production, logistics, trading and processing.
The new areas, like investing in oil refineries, require long-term capital that the trading houses in the past did not needed. Some trading houses have not opened their equity to outsiders, but are seeking bond investors.
Mercuria opened to outside investors last year, selling half of its subsidiary Vestas Terminals, which focuses on oil storage and terminals in Europe, to Sinopec Kantons, a Hong Kong-listed subsidiary of the Chinese state-owned oil company. The deal valued Vestas at $442m, including debt.
The sale of Vestas replicated the strategy followed by two of Mercuria’s closest competitors among the world’s largest oil trading houses with similar terminal businesses.
Vitol sold a 50 per cent stake of its tanking and terminal business, called Vitol Tank Terminals International (VTTI), to a subsidiary of Malaysia’s national oil company Petronas for $735m in cash in 2010. And Trafigura sold a 20 per cent stake in Puma Energy, its terminals and storage business, to Sonangol Holdings, a subsidiary of Angola’s state-owned oil company in 2011.
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