The Vallares deal in Iraqi Kurdistan bears the hallmark of Ian Hannam, who has spent more than a decade convincing the London market to buy resources companies from risk-prone emerging markets.
As chairman of equity capital markets at JPMorgan Cazenove, his team has brought India’s Vedanta, Kazakhstan’s Kazakhmys, Mexico’s Fresnillo, Ukraine’s Ferrexpo, and African Barrick Gold into the FTSE 100, dramatically changing the index’s make-up and investment portfolios across the UK.
Using mobile phones crammed with the numbers of oligarchs and City grandees, the banker works with frantic energy and a habit of leaving sentences half-finished.
His knack for stressing rewards rather than risks was evident in 2009 when he touted Iraqi Kurdistan. The frontier oil region would have a powerhouse, he told investors, when Turkey’s Genel Enerji merged with London-listed Heritage Oil in an $6bn (£3.8bn) deal.
“Ian Hannam senses in investors exactly the appetite for the risk that he is selling,” says the chief executive of a company that the banker helped to float. “He is the man who gets in front of the man who writes cheques, the investors, and gets success.”
The problem was that the risks – inherent in all resources plays – wrecked the deal. Months of political disputes over Kurdish oil exports weighed on the Heritage share price. Meanwhile the Financial Services Authority, the City regulator, fined Genel’s chief executive £1m for insider trading ahead of the merger.
The deal is now revived courtesy of Tony Hayward and Nathaniel Rothschild, the financier, whom Mr Hannam advises.
A feature of the deal is its reuse of formulas and connections the JPMorgan Cazenove team favours. Vallares, like Heritage before it, is proposing a 50-50 merger with Genel predicated on the expansion potential of Kurdistan’s oilfields.
Vallares is a carbon copy of Vallar, the cash shell Mr Hannam and Credit Suisse created for Mr Rothschild. Last year, Vallar raised £700m in London without identifying a target. It then agreed a deal with Indonesia’s Bumi Resources and was renamed Bumi plc, a Indonesian coal miner now on the threshold of the FTSE 100.
Someone had to connect Indonesia’s Bakrie family, the controlling shareholders of Bumi, to Mr Rothschild. Last year, Mr Rothschild told the Jakarta Post, “JPMorgan’s Ian Hannam played a very important role in identifying the opportunity. He approached me in October, saying that there’s a great idea of introducing me with Nirwan Bakrie and he outlined the strategy, too.”
Xstrata, a client of JPMorgan Cazenove since its 2002 flotation, provided an even earlier template of takeover vehicles in the resources sector.
A former associate says: “Structures get adapted, come back into play and if the companies don’t believe they will work he [Mr Hannam] says, ‘here’s the number of my friend this billionaire; it worked for him. Call him’.”
Clients say Mr Hannam, a Londoner, is not the only star of the JPMorgan Cazenove resources franchise, nor of the Flemings franchise that preceded it.
“He is the promoter, but he has a machine behind him,” says a former client. Lloyd Pengilly, Lord Robin Renwick, and Mr Hannam form a “trifecta”, says a former colleague, each playing complementary roles in nurturing deals.
“Mr Hannam has deep relationships with the institutions,” the former client says. “But there is an inherent conflict of interest. The reason he can place your equity is that he can persuade the funds they will make money. The funds will want the pricing as low as possible.”
The former Special Air Service soldier avoids publicity but his personality tends to make him the frontman. A person who attended a presentation by the chief executive of Kazakhmys tells how Mr Hannam was late. “The presentation was already over. But then a junior banker pushed open the doors and in walked Mr Hannam. He was talking loudly with two phones about an unrelated company. He circled the table three times, finished the call, then walked up to Oleg [chief executive Oleg Novachuk], made polite talk for a minute, and walked out of the room.” The point was “he did not ‘miss’ the presentation”.
Outside the resources sector he has raised capital for HSBC and SABMiller, the brewer whose South African roots are a theme of his career.
Another former colleague talks of the “media wonderwall” Mr Hannam built in the Cape Town headquarters of Sanlam during the financial services group’s 1998 flotation in South Africa. “There were 30 or 40 people and multiple screens, and as demand came in, the allocations went up on the screens. He was on the phones, giving orders. It was a bit James Bond. The war room was partly for show, to satisfy the client,” the colleague says. “But it’s clear he comes from a military background.”
Iraqi Kurdistan may seem a risky frontier for some investors but Mr Hannam is also involved in copper-rich Afghanistan. “There are those who feel he’s an unguided missile,” says a South African banker. “But the thing about missiles is they can be very effective.”
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