Message Mer 13 Avr 2011 08:18

Glencore positions itself for growth with imminent IPO

Glencore positions itself for growth with imminent IPO
Wednesday, 13 Apr 2011

Globe and Mail reported that Glencore International AG is on the verge of launching what could be Britain's largest initial public offering to date, one that would give the commodities trader the ability to play the mining consolidation game as the commodities rally powers ahead.

Investment bankers expect the IPO documents to be filed as early as April 14th 2011 for a deal that would value Glencore at about USD 60 billion, almost double the worth implied by the sale of convertible bonds in late 2009.

Mr Ivan Glasenberg CEO of Glencore said that the IPO was imminent, but would not provide a date.

Based on the latest valuations, the expected sale of 20% of the company would raise as much as USD 12 billion.

Glencore has been planning for the sale of the shares, which are to be listed in Hong Kong as well as London, for at least a year while it danced with Xstrata PLC, the Anglo Swiss mining group that bought Canada’s Falconbridge in 2006. Glencore had hoped that Xstrata, which is 34% owned by Glencore, would agree to a merger. If that had happened, Glencore would have gained a stock market listing by default, because Xstrata trades in London.

Analysts said that the Glencore IPO will attract a lot of interest from investors everywhere because of its rising profits, sheer bulk and the new allure of commodities traders, such as Hong Kong’s Noble Group, as an investment class.

Mr Miriam Hehir credit analyst in London with RBC Dominion Securities said that "I would fully expect Glencore equity to attract strong institutional investor interest, including from Canada. This has been very well flagged for a long time. Even sector investors not involved in Xstrata would have been taking a look."

Glencore's equity might find strong support among big-name institutional investors such as asset manager BlackRock, which invested in Glencore's convertible bonds. But the company’s complexity might make the shares less appealing to small investors.

While Glencore is known as a commodities trader, 62% of its 2010 EBITDA of USD 6.2 billion came from industrial sources mining operations. They ranged from the 74% owned Katanga Mining, which is listed in Toronto, to 100% owned Prodeco Group, a Colombian coal miner.

Hybrid trading and mining groups are rare. Glencore's listed assets have a public value and the implied value of the non listed assets can be easily estimated. Assigning a value to the more volatile trading side (which includes substantial logistical operations such as ports and shipping) is more difficult.

In February 2011, London's Liberum Capital valued Glencore’s equity at about USD 61 billion. Of that total, about a third came from the trading operations. Last year, Glencore made USD 3.8 billion in profits on sales of USD 145 billion.

Meanwhile, Glencore is also expected to announce a new chairman when it releases its IPO documents. The share sale is likely to be led by Citigroup, Morgan Stanley and Credit Suisse.