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World's Largest Commodities Trader Closer to Massive IPO

Glencore International, the world’s largest commodities trader, is signaling to bankers that it expects to issue at least $7 billion in stock as part of an initial public offering to launch as early as April, says someone familiar with the matter.

Chemoil Energy
Source: Glencore.com
Chemoil Energy

The Swiss trading firm, which is also heavily engaged in the physical production and marketing of oil, gas, wheat, corn, aluminum, nickel, and other raw materials, met with bank analysts in London as part of a two-day presentation earlier this week, according to several people who were briefed on the meetings.

The goal, these people said, was to start educating banks about Glencore’s closely-held business as a precursor to an IPO, whose road show could begin in late April and be followed by an offering in early May.

Glencore’s new issue could be sized at anywhere from $7 billion to $15 billion, and would likely represent just a fraction of the company, other people familiar with the matter say. Glencore’s valuation, while difficult to calculate because few details of its financial condition are known, is speculated by traders to be somewhere between $50 billion and $80 billion.

Earlier on Thursday, Glencore reported a 39 percent uptick in net income in 2010 compared to $3.8 million the prior year—a performance it credited to the improved environment for metals and minerals. During the same period, revenue improved by a similar margin.

At the same time, the company carries a heavy net debt load of $14.8 billion, up from $10.2 billion last year.

Indebtedness and the strong need for cash in its capital-intensive trading business may be spurring Glencore’s desire for an IPO, say bankers and traders knowledgeable about the company. Glencore debt trades at junk levels, and its bonds were battered during the financial crisis, amid doubts about the company’s future creditworthiness.

Another possible motivation for a Glencore issue, say these people: the notion that some commodity prices may be topping out. With gold at an all-time high and crude oil hitting recent highs, for instance, Glencore would likely be able to capitalize on highflying valuations in some of the products it mines, produces, and trades, they say.

Glencore held a conference call for investors on Monday, but has yet to publicly confirm plans for an IPO. Such an offering “remains an option,” said a person close to the company, who declined to comment further.


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