GLG, one of the world’s biggest hedge funds, is planning to seed an oil production company and list it on the London Stock Exchange.
GLG, based in London but listing its own stock in New York, intends to seed a venture called Lothian, that will be floated on the London Stock Exchange in September and then acquire oil production assets worldwide. Lothian would begin with a market value of about $500 million, said the sources, who were not authorized to speak for attribution because the venture is still in the planning phases.
As the Reuters story notes, big banks such as Morgan Stanley and Goldman Sachs are active in physical oil, but this tends to be accomplished through taking stakes in or buying existing companies. Exposure to physical assets is convenient for entities wanting to seriously invest in the oil markets for all sorts of reasons: hedging exposure, price discovery and generally avoiding the pitfalls of paper-only trade such as rolling in the physical contracts. Not to mention that pesky threat of regulation: why let the physical traders have all the fun?
But why the rush to list? The Telegraph says GLG is already advanced in putting together a team of directors:
GLG, which is listed on the New York Stock Exchange, is helping to put together a management team for Lothian that includes Tom Hickey, the former finance director of Tullow Oil, John Kennedy, chairman of Wellstream Holdings – the Newcastle-based manufacturer of pipes for the oil and gas industry – and Andrew Knott, a former analyst at Merrill Lynch who joined GLG last year. It is thought they are looking for one more high-profile director before the flotation.