May 4 (Bloomberg) — Glencore International AG, the commodities trader planning the year’s biggest initial public offering, said the share sale in London and Hong Kong this month may value the company at about $61 billion.
Glencore plans to sell shares at 480 pence ($7.90) to 580 pence each, the Baar, Switzerland-based company said today in a statement. The mid-point of the range indicates a market value of $61 billion upon listing, with final pricing around May 19.
The company, ending more than three decades of operating as a closely held partnership, may raise about $10 billion in the sale, making it the largest IPO since General Motors Co. sold stock in November. So-called cornerstone investors, including Abu Dhabi’s Aabar Investments PJSC and BlackRock Inc., agreed to buy about 31 percent of the shares on offer, Glencore said.
The sale has “one of the largest cornerstone investor participations ever achieved for an IPO,” said Chief Executive Officer Ivan Glasenberg, who will own a 15.8 percent stake upon listing. His holding may be worth about $9.6 billion based on the mid-point of the pricing range.
That mid-point values Glencore at about $52.5 billion before it receives the IPO proceeds, based on 6 billion shares outstanding before the sale. Four analyst reports last month from banks advising on the offering gave an average pre-IPO valuation range of $52.3 billion to $68.7 billion.
‘Good Deal’
“We might be towards the lower end of the range,” John Meyer, an analyst at Fairfax IS in London, said in an interview with Mark Barton on Bloomberg Television’s “Countdown.” “A lot of these cornerstone funds have been promised a good deal here and if you price at the top of the range you risk maybe messing that up and breaking that promise.”
Glencore expects conditional dealings in the shares to start on the London Stock Exchange around May 19 and admission and unconditional trade from May 24. As much as 13.9 percent of Glencore will be publicly tradable, according to a sale document sent to potential investors and obtained by Bloomberg News.
Aabar Investments, an Abu Dhabi government-controlled company, has agreed to invest $850 million and BlackRock $360 million, making them the two biggest cornerstone investors, according to Glencore’s IPO prospectus published today.
IPO Investors
Brookside Capital LLC, Credit Suisse Group AG, Eton Park Capital Management LP, Fidelity Investments, Government of Singapore Investment Corp., Och-Ziff Capital Management Group LLC, Pictet & Cie., UBS AG, York Capital Management and Zijin Mining Group Co. are also investing, the prospectus shows.
The IPO was announced April 14, the same week that Goldman Sachs Group Inc. advised a retreat from commodities, saying the risks of investing outweighed potential gains. The Standard & Poor’s GSCI Total Return Index of 24 commodities has beaten bonds, stocks and the dollar every month since December, the longest run in at least 14 years.
Glencore’s first-quarter trading performance “continued to benefit from improved market conditions, as also experienced in the final months of 2010,” the company said today.
Glencore, which trades commodities including coal, oil and metals, plans to sell about $7.9 billion of new stock while existing holders may sell an additional $2.1 billion in shares for tax purposes and to repay loans. The company said last month it will use the funds for expansion and acquisitions.
The IPO includes an overallotment option, known as the greenshoe, of 10 percent of the offer. Cornerstone investors are subject to a lock-up period of six months, Glencore said.
General Motors
General Motors sold $15.8 billion of common shares and an overallotment raising $18.1 billion. Glencore is likely to be included in the FTSE-100 Index on the first day of trading in London, it said last month.
Citigroup Inc., Credit Suisse and Morgan Stanley are managing the IPO as global coordinators, along with Bank of America Corp. and BNP Paribas as joint bookrunners. Barclays Plc, Societe Generale SA and UBS were appointed co-bookrunners.
Glencore employs 2,700 people at trading units across more than 40 countries and about 54,800 people at its industrial operations, its website shows. The name, short for “global energy commodity resources,” was changed from Marc Rich & Co. after management bought out former fugitive U.S. financier Marc Rich in 1994.
Glencore is the biggest shareholder in Xstrata Plc, the world’s largest exporter of power-station coal, with a 34.5 percent stake.
Glencore sold $2.2 billion of convertible bonds, its first such offering, in December 2009, saying the debt could be exchanged for shares in the event of an IPO. BlackRock, Government of Singapore Investment, Zijin Mining and First Reserve Corp. invested in the bonds.
The sale gave the company a pre-conversion equity value of $35 billion, Glencore said at the time.
–Editors: Amanda Jordan, Alastair Reed
