Glencore plans $10-b IPO

London is set for its largest ever IPO later this month as commodities trading giant Glencore announced plans to raise up to $10 billion, valuing the firm at over $60 billion.

The price range will be set between 480 and 580 pence, giving Glencore a total valuation of around £36.5 billion or around $61 billion (taking the mid-point of the valuation). This would make it London's largest ever IPO in terms of valuation — the previous record holder being Orange in 2001 with a market capitalisation of £29.1 billion. If it achieves the target price, the company would be the first in 25 years, and the third ever, to qualify to enter the FTSE-100 on its first day of trading, under the FTSE's fast-track scheme.

To do so, it would have to have a full market capitalisation amounting to more than 1 per cent of the full capitalisation of the FTSE All-Share.

Glencore, based in the tiny Swiss town of Zug, hopes to raise $7.9 billion of new shares and secondary sales of $2.1 billion by existing shareholders. Glencore says, it will use the proceeds for capital expenditure and to fund expansion and reducing its debt.

‘Sensible pricing'

The pricing was at the lower end of the expectations of many market pundits. “[The pricing] seems eminently sensible,” says David Buik, of BGC Partners in London, who pointed to considerable levels of public scepticism about the firm, which had been cloaked in secrecy over the past few decades.

“What they need is a good shareholder register and guaranteed profits on the first day.”

Conditional trading is set to begin in London on May 19, with admission into the London Stock Exchange on May 24, and Hong Kong (most likely) the day after.

Glencore was founded in 1974 by former fugitive Marc Rich, who started the firm focussed on the physical marketing of metals, minerals and oil, and later acquired a grain trading business, a Peruvian mine, a US smelter and a stake in the miner Xstrata.

He sold the firm to its current owners in 1994. Rich, of course, was the controversial financier who was indicted in the US for tax evasion and fraud in 1983 but later pardoned by the former US President, Mr Bill Clinton.

Glencore now has around 57,800 employees (excluding marketing) and operates in around 30 countries.

The firm is controlled by 485 partners who each stand to make around $100 million from the IPO.

Details that have been published by the firm since it first announced its IPO plans in mid-April have confirmed the huge scale of its operations.

It revealed that it is the largest supplier of third-party sourced commodities in most of the metals and minerals that it markets, with an astonishing 60 per cent of the world's marketable zinc, 50 per cent of copper and 45 per cent of lead.

The firm reported net income of $4.8 billion in the year to December, a 41 per cent rise on the year before.

Last month, the firm appointed Mr Simon Murray, chairman of GEMS, as its chairman, who will join a board made up of CEO Mr Steven Kalmin, and five non-executive directors. Mr Murray has already come under fire for saying it was risky to hire women, because they were likely to get pregnant and be less career focussed, in an interview with Daily Telegraph .

Still, the listing has already attracted immense interest, with cornerstone investors — locked in for several years — prepared to buy around 31 per cent of the issue.

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