Anglo American broke firmly with its colonial recently, appointing an outsider and woman, Cynthia Carroll, as chief executive. The announcement surprised many as Anglo has a tradition of appointing insiders who are familiar with the company’s corporate culture and history.
Previous incumbents typically have had an Oxbridge education and have all been male.
But in the post-apartheid era, Anglo, which had built up an unwieldy and unfocused set of South African assets, has been selling off billions of rands of assets to make it more streamlined.
Under its present chief executive, Tony Trahar, the restructuring has continued, with all but a core of its assets up for sale or divestiture. Anglo is even reducing its shareholding in AngloGold Ashanti, surprising the market in that gold has been an important part of the company’s history.
But Anglo has continued to attract less interest from investors than competitors such as BHP Billiton and there has been speculation in recent times that the commodity giant could itself be the subject of a takeover attempt.
By appointing Carroll, an outsider, the world’s third-largest commodities group is signalling that it intends breaking with its past and controlling its own destiny rather than to be taken over and broken up.
Carroll’s appointment also suggests an openness to new ideas. Not only is she the first outsider to head Anglo, she is also its first female executive, and the first non-South African. She will also be the only female head of a London-listed mining company.
In 10 years, only three female chief executives, including Carroll, have been appointed to FTSE-100 companies. If this rate of progress continues, it will be 150 years before there is gender parity among FTSE-100 CEOs, The Guardian commented on Wednesday.
In announcing the appointment, Sir Mark Moody-Stuart, chairman of Anglo, emphasised the outsider perspective that Carroll will bring to the job. “By the beginning of next year, we will be well on the way through the delivery of our strategy. Much of the focusing will be under way or completed. And we’re not changing that strategy. So what we need to do is use the external experience to see whether there are ways in which we can improve our delivery.”
There was speculation that Carroll may not have been the first choice. Corus head Philippe Varin had been seen as a front runner, while Simon Thompson, a South African who heads Anglo’s base metals division, was mentioned as a contender by one analyst.
Carroll (49) presently heads up Alcan’s primary metals division, which has a turnover of $12-billion and contributes 75% of the Canadian group’s earnings. In the past few years, Alcan has transformed itself to one of the lowest cost aluminium producers in the world, delivering more than $1-billion in asset optimisation. Anglo may covet similar results.
She joins Anglo’s board in January, and will take over from incumbent Trahar in March. She will earn an annual salary of £900 000, which is in line with Trahar’s package, as well as a maximum bonus of 150% of her salary. Anglo also said it would compensate her for leaving Alcan.
Though her profile is low, Carroll has South African experience, as Alcan is considering an aluminium smelter at Coega in the Eastern Cape. Analysts complained that she was an unknown quantity, with no previous experience as a CEO, but admitted that she had a good track record.
The government has welcomed her appointment. Minister of Minerals and Energy Buyelwa Sonjica said she was to meet with Carroll on Thursday, when the CEO-designate flew in to greet Anglo’s South African staff and stakeholders. “I’m very excited that we are seeing the first woman taking the top position in a conservative industry, which has been the preserve of men,” she told listeners to Classic FM.
Given South Africa’s commitment to female empowerment, Carroll’s gender could be a bonus. This is especially relevant for Anglo’s relations with the ANC government, which have been prickly at best. Trahar’s 2004 remark that South Africa’s political risk was increasing, famously drew the ire of President Thabo Mbeki. Anglo has also been viewed as a colonial entity, having built up most of its wealth during the apartheid era. But, it has been transforming itself since 1999, when it listed on the London Stock Exchange. It sold off extensive non-core assets, about $9-billion worth.
Last year, Trahar announced a further phase to Anglo’s restructuring. It would sell off Highveld Steel & Vanadium — of which it owned 79% — and would also consider selling its 53% stake in Tongaat-Hulett. Paper company Mondi would either be unbundled or separately listed.
But the downside of Trahar’s vision to transform the mining house into the lean, consolidated group is that Anglo has been left vulnerable to takeover bids. Carroll’s most important task may be to defend Anglo, otherwise her stint as CEO could be short-lived indeed.
… but should she watch out for Brian?
The market is abuzz with speculation that South African-born wheeler-dealer Brian Gilbertson, chairman designate of Russian aluminium group Rusal, is planning to launch a hostile bid for Anglo. Rio Tinto, Brazil’s CVRD group, and Xstrata could also be in the running.
According to The Times of London, Gilbertson told a board meeting that once Rusal’s merger with fellow Russian company Sual had been completed, it should buy into Anglo and engineer a reverse takeover. Gilbertson called the report “fiction”.
One analyst, who asked not to be named, outlined the challenges Gilbertson would face. Rusal’s merger with Sual, of which Gilbertson is the CEO, and Glencore International, is still in the early stages and will require much focus from company executives. Sual will be the smaller part of the new company, so Gilbertson’s influence is limited. Anglo American is double the size of Rusal and Sual put together, and there may also be difficulties from Viktor Vekselburg, the tycoon who currently controls Sual. “It’s possible, but there’s a hell of a lot to do,” the analyst summed up.
He said Gilbertson would need at least 18 months, but by then Rio Tinto or Xstrata may also be in a position to bid, and Anglo may be in a position to defend itself.
Multinational companies are often wary of investing in South Africa, said another analyst, commenting on the takeover rumours. This is because of legislation, but also because mining conditions are more complex compared to many other countries, he said. Anglo American still derives 40% of its earnings from South African mines, so this would be a factor buyers need to consider.
Gilbertson may well find Anglo an attractive target despite the difficulties, and he already has South African experience. His object, according to The Times, is to gain a listing for Rusal. Vekselberg, the present owner of Sual, apparently wants a foreign listing to protect his assets should he lose favour with Russian prime minister Vladimir Putin. But as the author of the merger between BHP and Billiton, Gilbertson may want one final big deal before he retires.
He left BHP Billiton under a cloud in 2003, just six months after completing the merger. Chairperson Don Angus was quoted as saying: “The board had concerns Mr Gilbertson, who was used to having sole control over Billiton, was having trouble adjusting to Australian corporate governance requirements.”
Gilbertson was apparently hoping to pull off another large merger with BHP Billiton when he left.
His liking for acquisitions and a controlling management style may make more risk-averse investors uncomfortable, but he does know how to deliver the goods. He built Billiton into the world’s largest diversified resource group in just seven years.
He’s certainly made a lot of money over the years. He reportedly earns £50-million a year at Sual, with further performance-based incentives should it list. While at BHP Billiton, he was the United Kingdom’s highest earning executive with £800 000 a year, in 2002. He received a £9-million payout when he left. At Vedanta Resources, from where he was head-hunted by Sual, he sold £3,6-million pounds worth of shares and reportedly took £6,5-million on leaving. — Jocelyn Newmarch