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Top commodities traders dismiss IPO route after bumper profits

Executives at Vitol, Trafigura and Mercuria say banks and export credit agencies have never been so keen to lend to them

Three of the world’s largest commodity traders said their $23bn in combined profits last year showed they could continue growing strongly without having to turn to public markets.

Jeffrey Dellapina, chief financial officer of Vitol, the world’s largest independent oil trader, said there was “no chance” that it would ever consider an initial public offering.

“I have a vote in it, not the deciding vote, but I’m sure I could rally enough people to kill any prospect of that ever happening,” he said. Vitol posted an annual profit of $13bn in 2023, the second year of bumper earnings after a record $15.1bn profit the year before.

“We are incredibly fortunate in terms of how well the industry has done. The fact is that we don’t have a capital need. So what would be the driver at the end of the day?” he added, at the FT’s Commodities Summit in Lausanne.

Most of the world’s largest commodity traders, who play a key role in selling and transporting everything from oil and gas to metals and grains across the world, remain in private hands, feeding concerns about the transparency of an industry that is a backbone of the global economy.

But since Russia’s full-scale invasion of Ukraine, the traders have reaped huge profits from the volatility in global markets and say they have never enjoyed such easy access to credit lines from banks and governments.

Vitol, Trafigura and Mercuria posted record aggregate profits of $25.1bn in 2022. Last year marked the second-highest combined profit they generated.

Guillaume Vermersch, finance chief of Mercuria, said private ownership, with many employees owning shares in the company, was “a very powerful tool to attract and retain talent”.

He said there were no constraints on the growth of Mercuria, which made an estimated $2.7bn in profit last year, adding that it was in a different position to Glencore, which went public in 2011 in the last major IPO for a commodity trader, turning six of its senior partners into billionaires.

“The Glencore case probably needs to be put back in context. They were about to move into a major acquisition, very capital intensive, asking for a lot of long-term capital to develop the Xstrata merger,” said Vermersch. “We are not in this industry, so needs are different.”

In 2010, the year before it went public, Glencore’s net profit was $3.8bn on revenues of $145bn. Last year Vitol reported $400bn in revenues, while Trafigura posted $244bn in revenues and a record $7.4bn in profit.

Christophe Salmon, the outgoing finance chief of Trafigura, said the industry had now evolved from the days in which trading houses needed to find cash to pay out their major shareholders when they retired or left. “The company has a very diversified shareholding base of 1,200 . . . compared to the previous generation,” he said.

Salmon added that as well as significant support from lending banks, Trafigura had “unlocked” a new source of financing from export credit agencies. “We have raised approximately $5bn of total medium-term funding,” he said.

In addition to Salmon, two of Trafigura’s longest-serving partners, executive director Jose Maria Larroca and former chief operating officer Mike Wainwright, are retiring this year.

Asked if it was getting harder for Vitol to access financing specifically for oil trading as more banks start to focus on their net zero commitments, Dellapina had a one-word answer: “No.”

“This is a world that has to power itself. And, you know, I think banks do appreciate that,” he added.

Hedge fund billionaire is considered possible pick for Treasury secretary

John Paulson, the Republican megadonor considered to be a potential Treasury secretary if Donald Trump wins the presidential election, has warned that the US must not “decouple” from China, striking a more measured tone than the former president on trade.

The hedge fund billionaire, who hosted the Republican candidate at a $50mn fundraiser in Florida last week, also said tariffs, which Trump has vowed to impose on China, were a “blunt tool” to fix trade imbalances.

“We don’t want to decouple from China,” Paulson told the Financial Times in an interview. “China is the second-largest economy in the world. We need to have a good economic and political relationship with them.”

The comments show that trade remains an area of potential disagreement between Trump, who has repeatedly lashed out at “globalists” as he proposes an “America first” agenda, and his deep-pocketed Wall Street backers.

Trump launched a trade war with Beijing during his presidency and has continued to call for widespread tariffs and potentially a decoupling of the US and Chinese economy. He has also floated a 10 per cent tariff on all goods imported into the US.

Paulson advocated for “fairness and reciprocity” in the US relationship with China, which he said remained “very one-sided”, and pushed to eliminate a law allowing China to export cheap goods to the US duty-free.

But trade was “beneficial for the global economy”, he said, and tariffs were a “blunt tool to level the playing field”.

Paulson also struck a more moderate tone on the Federal Reserve than Trump, who has accused chair Jay Powell of being “political”, suggesting he might lower interest rates this year to help Democrats in the presidential election.

“So far, I don’t have any issues with the way the Fed is approaching their interest rate policies,” said Paulson, who made his fortune investing against the housing bubble that caused the 2008 crash.

Paulson also downplayed the strength of President Joe Biden’s economy, which has included fast growth, low unemployment and record stock market highs. The boom was due to “excessive” and “unsustainable” government stimulus spending since the Covid-19 pandemic, he said. 

Paulson instead heaped praise on Trump’s record, and declined to say that Biden had won the 2020 election.

“The 2020 election is in the past, but I do believe there were legitimate concerns raised about election integrity,” Paulson added. “Going forward, it’s very important that people believe in the fairness and integrity of elections.”

The Trump funder also hit out at the court cases against the former president, which include charges relating to his alleged efforts to overturn Biden’s victory.

“I think a lot of these cases against Trump are politically motivated,” Paulson said. “I never thought it would be happening in the US that our judicial system would be used for political purposes.”

He added: “When people understand the nature of these cases, they feel that Trump is being politically prosecuted. Instead of harming him, it’s creating enormous support for Trump.”

Dawn Ostroff and Nicole Seligman were on the independent special committee tasked with finding the best deal for all shareholders

Three Paramount Global PARA -6.87%decrease; red down pointing triangle directors are expected to leave the board soon, as the Shari Redstone-controlled entertainment company discusses a merger with Skydance Media.

Dawn Ostroff, a former Spotify executive, Nicole Seligman, an attorney and former president of Sony Entertainment, and Rob Klieger, Redstone’s longtime attorney, are expected to step down from the board in coming weeks, according to people familiar with the situation.

The directors’ expected departures come at a sensitive time for Paramount Global, as the company is in exclusive talks to merge with Skydance. Seligman and Ostroff are on a special committee of independent board directors that is tasked with pursuing the best possible deal for the company, whether that is with Skydance or another suitor.

The planned departures could be disclosed in a Paramount securities filing as soon as this week.

Skydance Media, the production company that has partnered with Paramount on such movies as Tom Cruise’s “Top Gun: Maverick” and “Mission: Impossible—Dead Reckoning Part One,” has agreed in principle to acquire Redstone’s National Amusements, the privately held company that owns almost 80% of the voting shares of Paramount Global, for around $2 billion in cash, The Wall Street Journal reported last week.

In a second step of that proposed deal, Paramount Global—owner of broadcaster CBS, cable brands like Nickelodeon and MTV, and the Paramount film studio—would acquire Skydance in an all-stock deal valued at around $5 billion.

The structure of that proposed deal has faced criticism from some investors, who have voiced concerns in letters to the board that the deal would be good for Redstone but would dilute Paramount’s nonvoting shareholders, people familiar with the situation said.

Skydance Media is a production company run by David Ellison and backed by his father, Oracle co-founder Larry Ellison, as well as investors such as Red Bird Capital Partners, KKR and Chinese tech-investment giant Tencent.

Private-equity firm Apollo Global Management submitted a competing offer to buy Paramount for $26 billion just before the company’s exclusive talks with Skydance began. Paramount directors decided not to engage with the offer because it wasn’t clear that Apollo had financing lined up and the company had not yet done due diligence, the people said.

Any deal is subject to approval by the independent committee of directors at Paramount.

Ostroff, who most recently ran content and advertising at Spotify, is leaving Paramount’s board after a year.

Seligman, who last month joined the board of artificial-intelligence company OpenAI, is departing the board after eight years. She joined the board of Viacom in 2016 before it was merged with CBS, the other wing of the Redstone empire, to form what is now Paramount Global.

Klieger joined the CBS board in 2017 and stayed on following the merger with Viacom.