Glencore IPO receives massive support from investors
14 May 2011
Glencore International Plc's $11 billion initial public offer received enough support from investors for it to sell the shares more than twice over, according to sources in the know of the matter.
According to one of the people, Highbridge Capital Management LLC, a hedge fund owned by JP Morgan Chase & Co, proposed a $500 million investment. The last orders for the offer are due on 18 May and final pricing would be disclosed the day following, the term sheet for the sale says.
Demand for stock in the world's largest commodities trader has held despite a slide in raw material prices last week, the biggest in two years. The slide wiped off $99 billion of market value. The IPO, the biggest after the stock sale by General Motors Co in November, would give Glencore a value of $61 billion if priced at the midpoint of its offer range, according to the company.
The company has placed as many as 1.25 billion shares on offer, with London shares priced at 480 pence ($7.84) to 580 pence each, according to a prospectus published last week. The company today priced the stock for listing in Hong Kong, which represent 2.5 per cent of the total offer, at HK$61.24 ($7.88) to HK$79.18.
Citigroup Inc, Credit Suisse Group AG and Morgan Stanley are some of the banks managing the IPO. Current holders might sell additional shares for tax purposes, even as overallotment options bring the total offer to $11 billion.
Slumping commodities, however, erode the value of Glencore's corporate investments with the trader's 10 largest holdings, including a 34.5 per cent stake in Xstrata Plc, falling 7.4 per cent last week, cutting about $2.4 billion off their value, according to an index of the company's investments.
Standard & Poor's GSCI Index of 24 raw materials was down 11 per cent, the highest since December 2008, due to slower US services growth and fewer German manufacturing orders. This was the largest fall of the index since December 2008.
According to a Bloomberg survey, global investors have tempered their optimism about the world economies and plan to put more of their money in cash and less in commodities over the next six months.
Glencore has operated for over three decades as a closely held partnership. The company changed its name from Marc Rich & Co following the management buying out former fugitive US financier Rich in 1994. The company has a 2,700-strong workforce at trading units across 40 nations and employs 54,800 people at industrial units in more than 30 countries.
