Noble’s Elman Prepares CEO Succession to ‘Take Life Easy’

Noble Group Ltd. Chairman Richard Elman
Richard Elman, chairman and acting chief executive officer of Noble Group Ltd. Photographer: Jerome Favre/Bloomberg

Billionaire Richard Elman said he will soon install a new chief executive officer at Noble Group Ltd. as the 71-year-old founder and chairman of Asia’s biggest commodity supplier prepares to ease his managerial control.

“I expect some other management changes that will allow me over the shortest period of time to take life a little bit easy,” Elman told Susan Li and Rishaad Salamat in an interview on Bloomberg TV’s “Asia Edge.” “It’s necessary for me to do it and I’d like to do it, but we will get a proper succession management in place before that. I promise that to myself and all the shareholders.”

Elman’s successor will inherit a company that has grown into Asia’s biggest listed commodity trader by sales in 25 years, overtaking century-old rivals in Japan including Marubeni Corp. Noble’s rapid growth over the last decade had also made it “a little bit lazy” as the company posted its first quarterly loss in 14 years in November, Elman said.

“We just have to shape up and deal with the situation,” said Elman, a former scrap yard worker who set up Noble with $100,000 in savings in a small Hong Kong office. “Everybody just has to be a little more cautious, a little more alert.”

Noble declined 1.8 percent to S$1.110 as of 3:47 p.m. in Singapore. The stock, down 1.3 percent this year, fell 48 percent in 2011, compared with a 17 percent drop in Singapore’s benchmark index.

Turbulent Period

Management changes at Noble follow a turbulent succession planning period since 2010.

Elman became acting CEO in addition to his chairman’s role after CEO Ricardo Leiman quit on Nov. 9, the day Noble announced a $17.5 million quarterly loss. Leiman’s departure followed those of Executive Chairman Tobias Brown, Senior Executive Vice President Peter James O’Donnell and Chief Financial Officer Stephen Jeffrey Marzo, all within 12 months.

The loss, due to underperformance in the cotton and carbon credit markets, threw Noble into a “major review” of its businesses to improve profitability, the company said Nov. 9 in a statement. Standard & Poor’s placed the company on credit watch with negative implications on Nov. 11, saying Noble’s financial strength has “weakened” and diminishing cash flows leave it with a higher leverage than appropriate to its BBB-rating. BBB- is the lowest investment grade.

“I believe this is an issue of the past,” Elman said in a separate interview today to Bloomberg News. “We continue on a daily basis to strengthen the balance sheet, to improve the cash flow, to improve all the various ratios.”

Cash, Credit

Noble had close to $1.8 billion in cash and in excess of $5.5 billion in committed credit lines and cash at the end of September and that amount has subsequently increased, Elman said today. The company, part-owned by China’s sovereign wealth fund, is not in danger of violating any borrowing contracts, he said.

Noble’s business is in a “good shape” and it is expected to grow this year amid tough market conditions, he said. Of the 23 analyst recommendations for the company’s stock, 15 are “buy,” five “sell,” and the rest are “hold,” according to data compiled by Bloomberg.

The person who will take over the management will need to act as a real leader, Elman said.

Yusuf Alireza, the former Asia-Pacific co-president of Goldman Sachs Group Inc., was negotiating with Noble to take over as chief executive officer, the Wall Street Journal reported on Nov. 14, citing an unidentified person familiar with the matter. Alireza, 41, was a long-term target for Noble and was due to leave the U.S. bank after 19 years service, the newspaper said.

New York, Hong Kong

Alireza, who joined Goldman’s fixed-income research group in New York in 1992, held positions in fixed-income sales and hedge fund sales and became a partner in 2004. He moved to Hong Kong in 2008 to run the securities division in the Asia-Pacific region. Elman has known Alireza for some time, according to the WSJ.

Elman, Noble’s biggest shareholder with a 21.6 percent stake according to data compiled by Bloomberg, transformed the company from its beginning more than 20 years ago to the biggest commodity trader listed in Asia with $78 billion in trailing 12-month sales. Its nearest competitors are Japan’s Toyota Tsusho Corp. with $71.2 billion and Mitsubishi Corp. with $66.3 billion, according to data compiled by Bloomberg.

Closest Rival

Prior to setting up Noble, Elman worked for commodity trader Phibro, the same company where the founder of Glencore International Plc Marc Rich got his start. Glencore, the largest public traded commodities company, said in marketing material before its IPO this year that Noble was its closest comparable competitor.

Noble expanded with the 2001 purchase of Andre & Cie.’s commodity trading unit in Asia. It started acquiring industrial assets about five years later, spending $2.55 billion since 2006 to buy stakes in Australian and Mongolian coal mines, Brazilian sugar mills and ethanol refineries, and building oilseed crushing plants in Argentina and China.

Noble will continue to pursue a spin-off of its agricultural assets, a transaction that was approved by the Singapore bourse last year, Elman said.

“It’s not a question of if, but when,” Elman said. “It really depends on the financial environment.”