Glencore Eyes Mid-$50bn Valuation

Glencore is set to price its initial public offering at a level that will give the commodities trading house a valuation in the mid-$50bn range, below an average forecast of $62bn, according to people familiar with the deal.

Chemoil Energy
Chemoil Energy

Following the issue of $8bn of new shares in the IPO the company will have a value of more than $60bn.

The lower-than-expected pricing comes in spite of strong demand from cornerstone investors, who are set to take about a third of the IPO, which is raising a total of $11bn from the sale of new and existing shares. The move is aimed at generating a share price rally for the company after its flotation.

“Ivan Glasenberg [Glencore chief executive] is determined to price a deal that has a great after-IPO performance,” said a person familiar with the IPO process.

An institutional investor who follows Glencore closely and plans to buy a large stake into the flotation said: “There is huge demand [from institutional investors], but Glencore is ready to leave money on the table to secure a great deal.”

The Swiss-based trader is expected to publish the details of its IPO price range and cornerstone investors on Wednesday, when it files its prospectus. Glencore plans to become a public company in London and Hong Kong this month

Abu Dhabi will lead the roster of cornerstone investors, which in exchange for a six-month lock-up period will obtain a guaranteed allocated stake on the sale.

Aabar, a unit of Abu Dhabi’s International Petroleum Investment Company, will invest $850m as a cornerstone investor, with at least another $150m to be bought during the bookbuilding process, according to two people familiar with the deal.

As such, the emirate is set to become Glencore’s largest shareholder, after the company’s employees. Mr Glasenberg is the trading house’s largest shareholder.

BlackRock and Fidelity are set to take $350m and $215m respectively. Swiss bank Credit Suisse is expected to buy $150m with UBS and Pictet taking $100m each.

Zijin Mining, the Chinese group, will buy an additional $100m. GIC, Singapore’s sovereign wealth fund, will also take a large stake. Several other institutional investors, including a top hedge fund, may take additional stakes.

Aabar, one of Abu Dhabi’s higher-profile investment funds, has assets valued at about $13bn, from stakes in Italy’s UniCredit bank and German luxury car manufacturer Daimler. IPIC also has investments in oil refiners Cosmo Oil of Japan, Cepsa of Spain and Austria-based OMV.

Aabar, chaired by Khadem al-Qubaisi, is an investment vehicle of IPIC, a government wealth fund founded in 1984 that focuses on overseas energy investments, overseen by Sheikh Mansour bin Zayed Al Nahyan, a senior member of Abu Dhabi’s ruling family. Sheikh Mansour, who also owns Manchester City Football Club, used IPIC to invest in Barclays bank during the financial crisis.

Mr Glasenberg last month broke a decade-long silence ahead of the launch of Glencore’s initial public offering, saying that the flotation would give the world’s top commodities trader the financial firepower it needed as consolidation gathers pace.

In an interview with the Financial Times, the company’s chief executive mapped out a strategy of “opportunistic” acquisitions on a much larger scale than in the past and said it would make sense to combine with Xstrata, the London-based miner in which the trader owns a 34 per cent stake.

Glencore and the cornerstone investors declined to comment.