Hong Kong/London: Top commodity trader Glencore kept a lid on its aspirations for a much-hyped market debut, targeting proceeds of $11 billion after securing record commitments from investors led by Abu Dhabi.
The world’s largest diversified commodities trader set a price range of 480 to 580 pence per share for the London IPO on Wednesday, confirming an earlier Reuters report. That values it at $61 billion at the mid-point, in line with early forecasts.
Glencore, which is planning a dual London and Hong Kong listing, said it is targeting gross proceeds of around $10 billion, before a 10% over-allotment option.
The listing will boost Glencore’s firepower for deals amid a boom in commodity prices, but will also push Glencore into the public eye after 37 years as a discreet private company, and will turn publicity-shy executives including chief executive Ivan Glasenberg, a former coal trader, into paper billionaires.
Glasenberg is Glencore’s largest shareholder with as much as 15%, but his precise holding, along with other details, will not be made public until the company publishes its full prospectus later on Wednesday.
“Glasenberg is more or less going to be worth around $10 billion,” a source close to the matter said.
Glencore’s estimate of its future market capitalization puts the company just above the mid-point of a wide $45 to $73 billion value implied by numbers released by Glencore in its intention-to-float last month.
The mid-point of analyst research was around $60 billion, though that excludes proceeds from the offering.
“We could have gone out with a much higher price range. (Glencore) knows a sensible price range is needed,” another source close to the deal said. “It is an attractive range and most people are saying that.”
Glencore also said it had struck agreements with cornerstone investors, who will take up around 31% of the total offer, one of the largest cornerstone books to date.
According to a separate term sheet seen by Reuters, Abu Dhabi’s IPIC Aabar will be the largest cornerstone investor, committing $850 million to the IPO.
Government of Singapore Investment Corp (GIC) has agreed to invest $400 million, while BlackRock Inc will invest $360 million, the term sheet showed. Other cornerstone investors included Credit Suisse Private Bank and Och Ziff, both agreeing to buy $175 million worth of shares.
Money on the table
“We’re looking for Glencore to leave something on the table for investors,” John Meyer, analyst at Fairfax in London, said. “We expect it to be a successful float. It’s well-backed by some very high-profile cornerstone investors.”
The source close to the deal said the cornerstones were oversubscribed, with not every early investor getting the full allocation they had requested.
People close to the matter have said Glencore is looking to target a strong market debut. A less ambitious valuation will also attract investors who have fretted over Glencore’s motivations for going public at what some see as the top of the commodity cycle.
The company confirmed earlier reports it is looking to raise around $7.9 billion from the sale of new shares in a primary offering, while its partners planned to raise about $2.1 billion in a secondary sale to pay off a tax bill linked to the IPO.
That would value Glencore at about 8 to 10 times estimated 2011 earnings, based on the average forecast of the three banks underwriting the IPO.
Founded in 1974 by trading sensation and later US fugitive Marc Rich, Glencore has until now held on to a fiercely prized tradition of public discretion, so investors will be scouring the prospectus, expected to be more than 1,000 pages long, for details on the company from its existing investors to its risks and details on its trading.
The prospectus is also expected to give the first indication of how much the commodities giant will pay its bankers in one of the biggest paydays for the sector this year.
Citigroup, Credit Suisse and Morgan Stanley are the joint global coordinators for the offer.
In its release on Wednesday, Glencore said it had appointed an extra 14 banks to lower ranking roles, boosting the syndicate disclosed last month and taking the total to 23 institutions.
Conditional trading of shares is set to begin on 19 May in London, with unconditional dealings in London on 24 May and Hong Kong on 25 May.
Glencore is expected to be fast-tracked into the FTSE 100 bluechip index at close of business on the first day of trading, given its size and share of the FTSE all-share index.
It will be the first company in 25 years to make the leap and only the third ever, after BT and BG.