SCHEDULE 13D/A: Glencore Updates Li-Cycle Stake and Details Extensive Past Legal Settlements Totaling Over $1.5 Billion

Glencore plc has filed an amendment to its Schedule 13D, confirming a 66.4% beneficial ownership in Li-Cycle Holdings Corp. through convertible notes and detailing over $1.5 billion in fines and forfeitures from past global legal proceedings related to bribery and market manipulation.

Summary

• Glencore plc, through its subsidiaries Glencore International AG and Glencore Canada Corporation, beneficially owns 83,420,624 Common Shares of Li-Cycle Holdings Corp., representing approximately 66.4% of the outstanding class.
• This ownership includes 83,413,201 Common Shares issuable upon conversion of secured and unsecured notes held by Glencore Canada Corporation, plus 7,423 Common Shares awarded to Mr. Kunal Sinha under Li-Cycle's 2021 Incentive Award Plan.
• The aggregate outstanding principal amount of the A&R Glencore Convertible Notes is $245,831,872.79 (inclusive of PIK interest), and the Senior Secured Convertible Note is $81,573,643.75 (inclusive of PIK interest).
• Adjusted conversion prices for the notes as of January 28, 2025, are $2.33 for A&R Convertible Note No. 1, $49.60 for A&R Convertible Note No. 2, and $3.02 for the Senior Secured Convertible Note.
• Glencore has disclosed significant past legal resolutions, including a May 24, 2022, agreement with the U.S. Department of Justice (DOJ) for $428,521,173 in fines and $272,185,792 in forfeiture/disgorgement related to Foreign Corrupt Practices Act (FCPA) violations.
• Another May 24, 2022, DOJ agreement involved Glencore AG paying a $341,221,682 fine and $144,417,203 forfeiture for commodity price manipulation.
• On the same date, Glencore entities agreed to pay $333,548,040 in civil penalties and disgorgement to the Commodity Futures Trading Commission (CFTC).
• Glencore also paid $39,598,367 under a resolution with the Brazilian Federal Prosecutors Office on May 24, 2022.
• Glencore Energy UK Limited was sentenced on November 3, 2022, to pay a financial penalty and costs of GBP 280,965,092.95 (approximately $340 million USD) after pleading guilty to bribery charges under the UK Bribery Act 2010 on June 21, 2022.
• The Office of the Attorney General of Switzerland (OAG) closed its criminal investigation against Glencore International on August 5, 2024, with a summary penalty order of CHF 2 million fine and a US$150 million compensation claim related to a 2011 bribery incident in the Democratic Republic of the Congo.
• The parallel investigation by the Dutch Prosecution Service was also concluded and dismissed following the Swiss resolution.

Sentiment

Score: 4

Explanation: The sentiment is moderately negative due to the substantial financial penalties incurred from past legal misconduct. While the resolutions bring closure to these issues and highlight enhanced compliance efforts, the sheer magnitude of the fines is a significant negative factor.

Positives

• Glencore has successfully resolved multiple significant legal proceedings across various jurisdictions, providing clarity on past misconduct.
• The company has cooperated fully with investigations by authorities, including the Swiss OAG, which was considered a mitigating factor in setting penalties.
• Glencore has taken significant measures to enhance its compliance program, particularly since 2016, demonstrating a commitment to improved corporate governance.

Negatives

• Glencore has incurred substantial financial penalties totaling over $1.5 billion across various legal settlements for past misconduct, including bribery and market manipulation.
• The company pled guilty to serious charges, including conspiracy to violate the US Foreign Corrupt Practices Act and conspiracy to commit commodity price manipulation.
• The legal proceedings necessitated the appointment of independent compliance monitors for a period of three years for Glencore International AG and Glencore AG.

Risks

• The document highlights the historical risks associated with bribery and market manipulation, which led to significant financial penalties and reputational damage for Glencore.
• The ongoing independent compliance monitoring for three years indicates continued scrutiny and potential for further findings related to compliance program effectiveness and internal controls.

Future Outlook

The document primarily details historical events and current ownership structure. It indicates that Glencore International AG and Glencore AG will be subject to independent compliance monitoring for a period of three years as part of their agreements with the U.S. Department of Justice.

Industry Context

This filing highlights Glencore's significant strategic investment in the battery recycling sector through Li-Cycle, aligning with the growing global demand for sustainable materials and circular economy initiatives. The extensive legal disclosures also underscore the heightened regulatory scrutiny and enforcement actions faced by major commodity trading firms globally regarding anti-bribery and market conduct practices.

Comparison to Industry Standards

• The document does not provide sufficient information to compare Glencore's financial results or operational performance against specific industry benchmarks or comparable companies. The focus is on ownership disclosure and the resolution of past legal proceedings, rather than a comprehensive financial performance report.

Corporate Governance

Legal Proceedings

• On May 24, 2022, Glencore International AG agreed to $428,521,173 in fines and $272,185,792 in forfeiture and disgorgement, and pled guilty in the Southern District of New York to one count of conspiracy to violate the US Foreign Corrupt Practices Act related to past actions in certain overseas jurisdictions.
• On May 24, 2022, Glencore AG agreed to a fine of $341,221,682 and forfeiture of $144,417,203, and pled guilty in the District of Connecticut to one count of conspiracy to commit commodity price manipulation related to past market conduct in certain US fuel oil markets.
• On May 24, 2022, Glencore International AG, Glencore AG, and Chemoil Corporation reached a separate agreement to resolve an investigation by the CFTC in relation to civil violations of the Commodity Exchange Act and CFTC regulations, agreeing to pay $333,548,040 in civil penalties and disgorgement.
• On May 24, 2022, Glencore further agreed to pay $39,598,367 under a resolution signed with the Brazilian Federal Prosecutors Office in connection with its bribery investigation.
• On June 21, 2022, Glencore Energy UK Limited pled guilty in Southwark Crown Court to five counts of bribery and two counts of failure to prevent bribery under the UK Bribery Act 2010.
• On November 3, 2022, Glencore Energy UK Limited was sentenced to pay a financial penalty and costs of GBP 280,965,092.95.
• On August 5, 2024, the Office of the Attorney General of Switzerland (OAG) closed its criminal investigation against Glencore International with a summary penalty order of CHF 2 million fine and a US$150 million compensation claim for failing to prevent bribery by a business partner in 2011 in the Democratic Republic of the Congo.
• The parallel investigation by the Dutch Prosecution Service was concluded and dismissed following the resolution of the Swiss investigation.

Related Party Transactions

• 7,423 Common Shares of Li-Cycle Holdings Corp. were previously awarded to Mr. Kunal Sinha (Global Head of Recycling at Glencore group), who holds these securities for the benefit of the Reporting Persons and will transfer them directly to the Reporting Persons after vesting.

Stakeholder Impact

• Shareholders of Glencore plc have been impacted by the significant financial penalties incurred from past legal proceedings, which reduce company capital.
• Shareholders of Li-Cycle Holdings Corp. are impacted by Glencore's substantial beneficial ownership, which could influence corporate control and strategic direction.
• Employees of Glencore are subject to enhanced compliance programs and internal controls, reflecting a stricter regulatory environment.
• Regulatory authorities have successfully enforced significant penalties, demonstrating their commitment to combating bribery and market manipulation in the commodities sector.

Next Steps

• Glencore International AG and Glencore AG will undergo independent compliance monitoring for a period of three years to assess and monitor compliance with agreement terms and evaluate the effectiveness of their compliance programs and internal controls.

Key Dates

Keywords

Glencore, Li-Cycle Holdings Corp., Schedule 13D, beneficial ownership, convertible notes, SEC filing, Foreign Corrupt Practices Act, FCPA, commodity price manipulation, bribery, legal settlement, compliance program, corporate governance, mining, metals, battery recycling