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Putting the American into Anglo American
David McKay
Posted: Wed, 01 Nov 2006
[miningmx.com] -- ONE ANECDOTE concerning Anglo American was: “A good day at the office was not having to make a decision.” Whether that’s an unfair comment on Anglo’s corporate culture is difficult to say, but it will be interesting to see what Cynthia Carroll – currently an executive at North American aluminium producer Alcan – thinks in a year’s time.
Carroll, appointed Anglo’s CEO from March next year, has it all to do. The perception of Anglo is that it’s somehow in need of “fixing”. Will Carroll recognise in the Main Street conglomerate an organisation choked by its own bureaucracy and out of step with its market? An equally valid question is whether they’ll be a company at all?
Betting that it can’t be fixed, hedge funds have piled into Anglo, taking its price to an all-time high of R348/share at the time of writing. The interest in Anglo is wholly based on the possibility
of a takeover or merger.
It’s been speculated that Brian Gilbertson, currently head of Russian aluminium firm Sual, was considering a reverse takeover of Anglo as a quick-fire follow-up to the $30bn merger of Sual with Rusal and Glencore.
That’s no slam-dunk, even for the protean Gilbertson. Shareholders of the combined unit would have to approve the takeover. There’s also no knowing whether Gilbertson has the appetite; after all, the Sual presidency was to be his last job.
In any event, Gilbertson’s near omniscience in mining affairs is but the latest interpretation in speculation that has lined up Xstrata, Rio Tinto – even Norimet – as Anglo suitors. A third, yet more elaborate notion, is that a consortium of interests will team up to dismantle Anglo piecemeal.
Quite rightly, Anglo has set about its business making a public show of diffidence, something it has always done well. But it must know that speculation of this ilk won’t die away any
day soon. In fact, rumours of Anglo’s demise might be encouraged by the strategic hiatus imposed by current CEO Tony Trahar’s impending departure and Carroll’s arrival.
Carroll, a left-field appointment if ever there was one, struck some as a declaration of Anglo’s independence. Fresh and breezy, she was not only an outsider – and a foreign non-South African one at that – but (gasp) a woman with four children aged six to 12 years.
What would former chairman Julian Ogilvie Thompson make of that? The white-haired patrician (MA Oxon) memorably commented that Anglo had once hired a Cambridge man but that he’d failed to fit in.
There was stunned silence on Carroll’s appointment from others. “Cynthia who?” asked one South African broker in a morning note. That’s not so parochial as it sounds. London analysts have been asking the same. Canadians also note that though they follow Alcan more closely, Carroll is viewed as a member of the team that lets the CEO do
the talking.
While most agree that Carroll is an unknown entity, more savage observations are that Anglo moved for a no-name brand because they couldn’t find anyone else to take the job. Unconfirmed speculation is that Anglo was rebuffed by Philippe Varin, boss of steelmaker Corus, and Mike Salomon, recently retired from BHP Billiton. Anglo won’t comment on other candidates.
Talk that Carroll is a second or third tier executive won’t wash out for months, not until she gets her hands on the job and starts meeting Anglo’s people. Initial indications are that Carroll may make a better fist of Anglo’s relationship with the government.
Peter Major, a fund manager at Cadiz, says that Anglo’s relationship with the government could be improved. “That’s one of the biggest pluses of this lady. The government has pushed women to high places. I think she’ll find it a lot easier to get an audience.” It’s interesting that among her first acts as Anglo CEO-elect is to
arrange a meeting with the government.
Lionel October, deputy director-general at the Trade & Industry Department, met Carroll when negotiating Alcan’s potential investment in an aluminium smelter at Coega, near Port Elizabeth. October says Carroll has “depth”. “There’s no doubt she has relationship skills. She’s also knowledgeable about the industry. Very knowledgeable.”
In a prepared interview published on Anglo’s website, Carroll speaks of being a team-builder. That sounds something that Anglo needs. Trahar – viewed as unbending, high-handed even – has boxed with the government on several occasions, once clashing with President Thabo Mbeki.
Depending on her style, Carroll may also have greater international appeal than Trahar, particularly as Anglo’s shareholder base becomes broader. Her operational focus – described by Anglo chairman Sir Mark Moody-Stuart as a person able to extract synergies – would also be positive for the group.
Then
there’s the gender thing. In South Africa’s male-dominated mining world there’s been subtle mumblings about the strangeness of a woman CEO. Some commentary has bordered on disapproval. But will Carroll’s sex be a weakness? It’s likely to be a distinct advantage.
Mike Schroder, whose Old Mutual Asset Management holds about 6% of Anglo, has long expressed an interest in miners leading mining companies. Comments of a dearth of corporate experience – or deal-making – in Carroll’s CV don’t concern him. “Carroll was involved in the merger of Pechiney into Alcan. That must have been a major accomplishment for her.”
To be honest, there is corporate experience. Carroll was responsible for Alcan’s first push into the Middle East with its investment in a smelter project in Oman last year. And apart from Pechiney integration, itself a $6bn deal, one US analyst comments that she was instrumental in the turnaround of the Auginish refinery in Ireland. That’s not an asset South
African readers will know, but among her peers Carroll has earned her wings.
Inevitably, there are some questions. First, there’s a world of difference between the 128,000 souls Anglo currently employs and the 18,000 in Carroll’s division at Alcan. Second, though a geologist, Carroll’s experience at Alcan may not prepare her for what’s coming at Anglo, particularly its deep-level mines.
For example, consider the difference between the quiet burr of an aluminium smelter against the cacophony of an underground mine. Making aluminium is a highly mechanised business. Men in white coats pick along the polished floors of those smelters. The contrast with Anglo’s coal, gold and platinum mines couldn’t be more stark. Digging rocks underground can be hell.
“Sometimes the
best person on paper isn’t always the best person for the job,” says an analyst. He may be right. But he’s certainly more cynical than most when he says that many analysts’ views concerning Carroll are actually supporting their calls on Anglo’s share.
Over and above that, there’s a strong suspicion that Carroll has been handed a poisoned chalice. Anglo is troubled by its past as a catch-all industrial firm attempting to modernise.
Under Trahar’s watch Anglo has toiled bravely to streamline itself. But his efforts have been disturbed by some unfortunate investment decisions, such as quitting Zambia’s copper industry and buying an aggregates business that almost immediately stumbled on a difficult market.
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