Expatica news

Glencore draws big investors for year’s biggest IPO

Commodities giant Glencore said on Wednesday that it has already attracted big investment, as it took the long awaited step of setting a price for the world’s biggest initial public offering so far this year.

Glencore, which valued itself at about $61 billion dollars, is aiming for a flotation on the London Stock Exchange and in Hong Kong later in May, for the first time in its 37 year history.

The Switzerland-based giant priced its shares at between £4.80 and £5.80 ($7.91-$9.55) for a sale aiming to raise about $10 billion.

“The mid point of that price range implies a market capitalization of approximately £36.5 billion (equivalent to approximately $61 billion) following the issuance of new shares in the IPO,” it added in a statement.

Final pricing is expected to be announced in May 19 when conditional dealing will start on the London Stock Exchange, with admission and full dealing in the shares on or around May 24 in London and May 25 in Hong Kong.

Glencore, the world’s biggest commodities trader by revenue — $145 billion in 2010 — has said that if the IPO is over-subscribed, it could sell more shares, sending the listing to about $12 billion.

It has already secured $3.1 billion from so-called cornerstone investors, including sovereign wealth funds in Singapore and Abu Dhabi, asset managers and private banks, according to media reports.

The company confirmed on Wednesday that it had reached agreements with “certain cornerstone investors” who have already accepted to subscribe for 31 percent of overall shares in its chosen price range.

“We are pleased by the strong investor interest shown in Glencore’s unique commodity business model,” said Glencore chief executive Ivan Glasenberg.

Glasenberg added that the price range continued the company’s long-term approach to business “and we look forward to welcoming new shareholders as long term partners in our growth.”

Miriam Hehir, director of credit research at Royal Bank of Canada Credit Markets, said: “Glencore’s IPO guidance today is broadly in line with our expectations.”

The offer has two components, a Global Offer to international institutional investors and an offering to retail and professional investors in Hong Kong.

The IPO is expected to overshadow the $5.5 billion Singapore offering of Hong Kong billionaire Li Ka-shing’s Hutchison Port Holdings Trust in March.

Glencore has said it would use funds raised by the listing to pay down debt, boost its stake in Kazzinc, a zinc producer with core operations in eastern Kazakhstan, and finance other projects to expand its business.

The sale comes as commodity prices soar amid huge demand from Asia, particularly China and India, for resources to power their economies.

Founded in April 1974 by trader Marc Rich, Glencore operated initially out of an apartment in central Switzerland’s Zug canton before quickly emerging as a major player in commodities trading.

From metals, minerals and crude oil, the group moved into agricultural goods and started to expand from simply trading third party commodities to acquire ownership of resources in the late 1980s by purchasing its own mines.