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Phibro optics

27 January 2016 By Antony Currie

Breathing life back into Phibro is misplaced sentimentality. Morgan Stanley’s former commodities boss Simon Greenshields has snapped up the brand and other assets of the firm that closed its doors a year ago. Though Phibro once was a commodities-trading powerhouse, its history connotes Wall Street’s worst ways.

For starters, Phibro was the object of a high-profile power struggle back in 1984. The firm had bought Salomon Brothers three years earlier when fears had mounted that the investment bank’s traders had taken heavy losses. Salomon’s Chief Executive John Gutfreund soon wrested control back in a forerunner of the sorts of coups that would soon proliferate in financial boardrooms.

Phibro, originally Phillips Brothers when founded in 1901, is also a poster child for excess pay. That became most obvious in 2009 when news broke that the firm’s then-boss Andrew Hall became the $100 million man. The unwanted post-crisis attention led bailed-out Citigroup to offload Phibro to Occidental Petroleum rather than take even more heat for handing over huge sums to traders.

That transaction, and the unit’s subsequent shuttering a year ago, recalls another time-honored tradition among financiers: finding firms that will buy high and sell low. M&A titan Bruce Wasserstein managed such a trick when he sold his boutique to Dresdner Bank in 2000 – and then quit, with many of his team following. In 1997, as the tech-stock peak approached, BankAmerica and NationsBank each bought one of Silicon Valley’s investment-banking Four Horsemen. Robertson Stephens would be sold again shortly and shuttered soon after. Montgomery Securities also eventually vanished.

Occidental bought Phibro when the oil price was on a steady march upward beyond $100 a barrel. The exploration and production company called time on Phibro at the end of 2014 during the precipitous fall in the price of crude. Hall, who was still running the outfit, is known as an oil bull, a reputation he maintains at his Astenbeck Capital, so named for his German castle. His fund was down 35 percent last year.

Greenshields has a chance to chart a new course for Phibro, but he has a long and tortured past to outrun.

 

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